UPDATED with closing price. Shares in Covid-19 darling Zoom Video Communications dropped 15% today despite the rising company’s stellar earnings report Monday.
Some Wall Street analysts have raised concerns that the shares are overvalued after a 600% surge in 2020 to date as corporations, schools, government offices and others flock to Zoom meetings. The stock finished the day at $406.31.
Dan Romanoff of Morningstar wrote in a note to clients, “We continue to struggle with Zoom’s valuation and view shares as overvalued.” Credit Suisse reasserted its “underperform” rating on the company’s shares, though it did raise its 12-month price target from $315 to $340 due to the blockbuster earnings.
For its fiscal third quarter ending Oct. 31, Zoom posted earnings per share of 99 cents, far better than the consensus forecast among analysts of 76 cents. Revenue also soared above Wall Street estimates, coming in at $777.2 million, nearly five times the $166.6 million recorded in the same quarter of 2019.
Zoom CFO Kelly Steckelberg was asked Monday during the company’s earnings call with analysts about the outlook for growth once workers return to offices and students to schools in 2021 and beyond.
“While we all hope for a vaccine as soon as possible, I think that remote work trends are here to stay,” she said. Features and products rolled out by Zoom in recent months will “support customers and employees that are thinking about potentially going back to work likely in some sort of a hybrid work environment.”
One example Steckelberg cited is Smart Gallery, which is designed to improve communication among workers when some are remote and some are in the office. “Customers are going to continue to want to provide that flexibility to their employees,” she said, which will help fortify Zoom’s bottom line.
J.P. Morgan agreed with that optimistic view, upping its 12-month price target on Zoom shares to $450 from $425 and reaffirming its “buy” rating.