DB - ZM Stock Is Falling After Earnings. Can Zoom Recover From Here?
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Society is slowly starting to pivot toward a post-pandemic world, forcing industries to adapt yet again to a changing economic landscape. Lately, there has been no greater indication of this trend than the gradual decline of the stock of a pandemic-defining company. Zoom Video Communications (NASDAQ:ZM) quickly rose to prominence as the pandemic took shape, helping people across the globe stay connected during lockdowns and shelter-in-place orders through high-quality video meetings. As in-person life resumes, though, prices have gradually decreased over the course of 2021, prompting the company to issue a revenue slowdown warning. ZM stock is falling fast and Wall Street is losing faith in it.
What’s Happening With ZM Stock
In late October, InvestorPlace’s Faisal Humayun predicted that ZM stock was likely to struggle as society adjusted to a post-pandemic world.
So far, he has certainly been correct. ZM has fallen almost 19% today as of this writing, and it shows no signs of picking back up. After only declining gradually throughout the past five days, shares plunged today, pulling the stock into the red by more than 25% for the week and almost 30% for the month. Collectively, ZM stock has fallen by almost 39% over the past six months.
For a stock that rose by more than 600% throughout the first fiscal half of 2020, these types of declines are significant, particularly as they symbolize the shift that society is undergoing.
The Word on the Street
These gains come on the tail of an earnings call in which it was reported that the company had beaten earnings estimates. Even with that in mind, Zoom’s executives were well aware that growth would be slowing in 2022, hence the aforementioned warning.
Wall Street responded to this grim prediction by slashing price targets on ZM stock. BTIG and Deutsche Bank (NYSE:DB) lower their 12-month targets from $460 to $400 and from $350 to $280, respectively. Other firms who did the same included Baird, Guggenheim, Wells Fargo (NYSE:WFC), Stifel (NYSE:SF), UBS (NYSE:UBS), Piper Sandler (NYSE:PIPR) and KeyBanc. Despite these price target decreases, Wall Street still remains bullish overall on ZM. CNBC reports that Baird’s team of analysts still see it as a stock with potential for long-term growth.
This sentiment doesn’t reflect all of Wall Street, though. Citi (NYSE:C) analyst Tyler Radke thinks that ZM will fail to beat estimates heading into 2023 and that such a development would have negative implications for the stock in the following year. While the majority of analysts maintain a buy rating on ZM stock, Radke maintains his issue of neutral and has reduced his own price target from $304 to $250.
The Road Ahead
There’s little room for doubt that Zoom is heading into a difficult year. While Covid-19 restrictions are still being tightened throughout Europe, which will mean more demand for video chat platforms, the company still faces plenty of competition as tech giant Microsoft (NASDAQ:MSFT) takes action to improve its Teams platform, a package that offers more than Zoom.
Remote work remains a hotly debated topic as employers made decisions about workers returning to the office. Even if the demand for video conferencing continues to increase, there’s no guarantee that it will yield the type of growth that ZM stock needs to regain its former place on top. Until we see another pandemic, Zoom likely won’t be getting back to where it was.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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