Why Zoom Video (ZM) Might Be Well Poised For A Surge

By Zacks Investment ResearchStock MarketsMar 10, 2020 12:20AM ET

www.investing.com/analysis/why-zoom-video-zm-might-be-well-poised-for-a-surge-200514838

Why Zoom Video (ZM) Might Be Well Poised For A Surge

By Zacks Investment Research | Mar 10, 2020 12:20AM ET

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Investors might want to bet on Zoom Video Communications (ZM), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

Analysts' growing optimism on the earnings prospects of this video-conferencing company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Zoom Video, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $0.10 per share for the current quarter represents a change of +233.33% from the number reported a year ago.

Over the last 30 days, six estimates have moved higher for Zoom Video compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 166.67%.

Current-Year Estimate Revisions

The company is expected to earn $0.41 per share for the full year, which represents a change of +17.14% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, nine estimates have moved up for Zoom Video versus no negative revisions. This has pushed the consensus estimate 115.63% higher.

Favorable Zacks Rank

The promising estimate revisions have helped Zoom Video earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Zoom Video have attracted decent investments and pushed the stock 26.9% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.

Zoom Video Communications, Inc. (ZM): Free Stock Analysis Report

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Zacks Investment Research

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