(Reuters) - Wall Street analysts raised price targets for Zoom Video Communications (O:ZM) on Tuesday as its shares hit a record high, while warning that a return to office work could hamper its success in luring small corporate customers.
Zoom shares soared as much as 47% to $478 in morning trade, with brokerages raising price guidance by an average of $161 after the company reported blockbuster quarterly results and lifted its annual revenue forecast.
The numbers also indicate that one of the success stories during the coronavirus pandemic is turning its huge free-user base into hard cash.
Chief Financial Officer Kelly Steckelberg said Zoom revenue grew so quickly that it was hard to keep investing at the same pace.
The top-growing sectors for the company during its second quarter were education, non-profits, manufacturing and healthcare, she told Reuters on Tuesday.
"With ZM now clearly established as the global leader in the video collaboration market, its success paves a more clear path to compete in the enterprise market," Rosenblatt analysts wrote.
J.P.Morgan analyst Sterling Auty, however, warned the churn rate for Zoom's high-risk small customers pointed to the risk of a pullback in revenue as the pandemic eases.
"The surge in growth has come increasingly from the riskiest customer segment," he said. "Customers with less than 10 employees reached 36% of total revenue in the quarter."
Video conferencing platforms have become a vital part of day-to-day life for people stuck at home under the coronavirus-related restrictions, be it for work, school or socializing.
But they face the risk of a drop in usage as people return to work from big office buildings.
Zoom said on Monday it was experiencing slightly higher rates of customer cancellation than the historical average, but had factored this into its forecasts.
"While it is extremely hard to gauge where ... demand will peak, it looks to us like even aggressive sales and marketing investments will not be able to stave off growth deceleration," said Citigroup (NYSE:C) analyst Walter Pritchard.