6 Metrics Behind Zoom Video's Soaring Stock Price
Shares of Zoom Video Communications (NASDAQ: ZM) have been on a tear since the company went public in April. Before the videoconferencing company posted its fiscal first-quarter results on Thursday afternoon, shares were already up 116% from the company's IPO price of $36 and 25% from the $62 price at which the stock closed its first trading day just a few months ago. But there was more where these gains came from: Shares soared 18.4% on Friday, following the company's strong fiscal first-quarter results.
Why is the Street so bullish on Zoom Video? Let's take a look at some of the numbers getting investors excited.
1. 103% revenue growth
Zoom's revenue in its first quarter of fiscal 2020 soared 103% year over year to $122 million, crushing analysts' average forecast for revenue of $112 million.
Revenue growth, management explained, was driven by growth in new customers as well as sales expansion within existing customers.
2. A $0.2 million net loss
While Zoom's $0.2 million net loss in its fiscal first quarter is small, it's a notable improvement from a net loss of $1.3 million in the year-ago period. Zoom's non-GAAP earnings also jumped sharply, rising from a net loss of $0.5 million in the year-ago period to $8.9 million.
3. $22.2 million of cash from operations
Capturing how lucrative Zoom's business model is, the company generated $22.2 million of cash from operations during its fiscal first quarter, up significantly from $2.8 million in the year-ago quarter.
Free cash flow, or cash from operations less capital expenditures, was $15.3 million, up from -$1.1 million in the year-ago quarter.
4. 58,500 customers
Zoom's customers with more than 10 employees increased 86% year over year to 58,500. The number of customers contributing over $100,000 in trailing-12-month revenue increased 120% year over year to 405.
5. A net expansion rate above 130%
Zoom's net dollar expansion rate, or the year-over-year increase in user spend of existing customers over the trailing-12-month period, was greater than 130% for the fourth quarter in a row.
6. Fiscal 2020 revenue between $535 million and $540 million
For the full year of fiscal 2020, management forecasts revenue to be between $535 million and $540 million, well ahead of the $526 million analysts were modeling for.
While Zoom's rapid growth is impressive, investors should tread carefully. The stock now has a wild market capitalization of more than $24 billion, despite the videoconferencing company recording only $331 million in revenue in fiscal 2019.
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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool has a disclosure policy.