It is unlikely the Q4 results will send Zoom Video (NASDAQ: ZM) higher, but signs with the report suggest this company is set up well for a broad economic rebound when it is ready to begin. The company’s metrics show the heydeys of triple-digit growth are over but have been replaced with a maturing company building a solid business base for the future. 

Among the takeaways from the report are that Enterprise business grew by 18% to outpace topline growth and now accounts for 50% of the revenue, that growth of business worth more than $100K annually is up 27% on a TTM basis, and that enterprise dollar-expansion exceeds 100%.

These are all signs the company is growing in a no-growth environment in terms of customers and revenue-per-customer while the customer base is steadily improving in quality. When the economic recovery begins, the company will have ample leverage to reaccelerate its growth. 

“Our growing base of Enterprise customers increasingly looked to Zoom to provide a seamless communication and collaboration platform, and drive productivity and efficiency during turbulent times,” said Zoom founder and CEO, Eric S. Yuan. “This was evident in the 27% growth in customers contributing more than $100,000 in trailing 12 months revenue, as well as the 115% trailing 12-month net dollar expansion rate for Enterprise customers … While the macroeconomic situation continues to negatively impact our overall growth, we have maintained a healthy balance sheet and operating cash flow generation of approximately $1.29 billion.”

Zoom Rises On Mixed Results 

Zoom Video Communications had a good quarter, but the results are mixed relative to the analysts and last year. The $1.12 billion in revenue is up 4.3% compared to last year’s 21% and the prior years' 365%, but it beat the consensus by 200 basis points. The growth was driven by an 18% increase in Enterprise revenue, a 27% increase in large customers, and an expansion of revenue per customer, aided by the rollout of new services over the past year.

Another metric of note is the churn which came in at 3.4% and down 40 basis points. 

The margin news is equally mixed, with the margin coming in far better than expected but down on a YOY basis. The company recorded a GAAP net loss due to non-cash stock-based compensation but $1.22 in adjusted EPS. This is a nickel shy of last year's profits but $0.40 better than expected; news that will support the price action if not keep it moving higher.

The guidance is also mixed, with the bias tilted to the upside. The company is calling for Q1 and FY revenue in a range below the consensus, but the margins are expected to be much better. The guidance for adjusted earnings is above the Marketbeat.com consensus at the low end of the ranges, which is news that could help the stock move higher. 

Analysts Lend Support To Zoom Video Market 

The analyst sentiment toward Zoom has been slipping over the last year, but that trend may be over. Marketbeat’s analyst tracking tools have picked up four commentaries, including 2 price target increases and 2 reaffirmed targets above the consensus figure. The consensus is about 33% above the current action, so there could be a rebound in the price action. 

The chart shows Zoom stock trading at 3-year lows and set up for a reversal. The market appears to be overextended and could quickly move up to the consensus near $100. Even so, the stock would be below key resistance, which could keep it moving sideways until later in the year when there is more visibility for the 2nd half and 2024.