Analyzing Zoom Video Communications’ Newly Added Risk Factor


California-based Zoom Video Communications (ZM) provides cloud communications solutions. The company recently agreed to acquire Germany-based Kites, a startup that offers real-time machine translation services. It also plans to open a research and development center in Germany.

Zoom recently terminated the agreement to acquire contact center software Five9 (FIVN) for $14.7 billion in stock. However, it remains interested in that segment and plans to launch its own contact center solution early next year. It sees a $24 billion revenue opportunity in the contact center market.

With this in mind, let us take a look at the company’s recent financial results and understand its newly added risk factor. (See Analysts’ Top Stocks on TipRanks)

Q3 Financial Results

Zoom’s third-quarter revenue jumped 35% year-over-year to $1.1 billion. Further, it posted adjusted earnings of $1.11 per share against $0.99 per share in the same quarter last year. Zoom ended the third quarter with $5.4 billion in cash. The company expects to deliver Fiscal 2022 revenue in the range of $4.079 billion to $4.081 billion. (See Zoom Video Communications stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, Zoom’s main risk categories are Finance & Corporate and Tech & Innovation, which account for 38% and 20%, respectively, of all the total 55 risks identified for the stock. The company has recently added one new risk factor under the Finance & Corporate risk category.

Zoom tells investors that it has made strategic investments in public and private companies. It says that investments in private companies can appreciate as a result of events such as an acquisition or IPO. However, it cautions that the valuation of private companies is usually complex. The company says that investments in public companies are subject to market volatility. Therefore, Zoom wants investors to know that the value of its investments in public and private companies can decline and adversely impact its business and financial results.

Finance and Corporate risk factor’s sector average is at 40%, compared to Zoom’s 38%. Shares of the company have declined about 38% year-to-date.

Wall Street’s Take

Following Zoom’s third quarter earnings report, Morgan Stanley analyst Meta Marshall reiterated a Buy rating on the stock with a price target of $365. Marshall’s price target suggests 75.23% upside potential.

Consensus among analysts is a Moderate Buy based on 12 Buys and 12 Holds. The average Zoom Video Communications price target of $310.44 implies 49.04% upside potential to current levels.

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