Popular video-conferencing company Zoom Video Communications (ZM) far outpaced sales expectations in the first quarter as millions of users flocked to use its technology to host business and social meetings during the coronavirus pandemic.First-quarter revenue surged 169% to $328.2 million year-on-year, beating analysts’ estimates of $202.7 million. Zoom now has about 265,400 customers with more than 10 employees, up about 354% from the same quarter last fiscal year.“The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom,” said Zoom founder and CEO Eric S. Yuan. “Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives. We also supported an unprecedented number of free participants, including over 100,000 K-12 schools.”Commenting on the earnings, five-star analyst Ittai Kidron at Oppenheimer, said that while Zoom reported “exceptional” results, “its gross margin significantly contracted (-1,480bps QoQ and -1,149bps YoY) due to high levels of free meeting minutes (K-12 schools) and increased public cloud hosting costs”. Indeed, cost of revenue in the first quarter skyrocketed 330% to $103.7 million year-on-year.Shares rose 1.9% to close at $208.08 ahead of the earnings release on Tuesday and dropped 1.7% in after-market trading.Looking ahead, the company raised its full-year revenue forecast to a range of $1.78 billion to $1.80 billion from $905 million to $915 million. This compares with analysts’ average estimates of $935.2 million for the fiscal year ending January 2021.Shares have more than tripled this year as Zoom has gone from an average of 10 million daily users to about 300 million this year. The analyst community will now wait to see if the user boom is sustainable as some countries are starting to relax their lockdown restrictions and employees are beginning to go back to their work place.Oppenheimer’s Kidron, who maintained a Hold rating on the stock due to valuation, says that Zoom has seen strong adoption, which calls into question how this develops as businesses reopen.“Zoom reported robust net expansion and user growth,” Kidron wrote in a note to investors. “Going forward, exposure to multiple growth levers (new customer growth and use cases, upselling, cross-selling Rooms/ Phones, int'l expansion, etc.) leaves us feeling positive. However, we admit we likely missed an entry point earlier this year and remain Perform-rated on valuation.”The rest of the Street is cautiously optimistic on the stock. The Moderate Buy consensus showcases 14 Hold and 2 Sell ratings versus 8 Buy ratings. Following this year’s sharp rally the $131.18 average analyst price target, now implies shares may decline 37% from current levels. (See Zoom stock analysis on TipRanks).Related News: Lyft Rises 5% After-Hours On Strong May Performance Beleaguered Hertz Sinks 36% In After-Market On Bankruptcy Protection Filing Carl Icahn Initiates Position in Delek US Holdings, Boosts Occidental Petroleum More recent articles from Smarter Analyst: * Alibaba Rolls Out Online Business Services As Covid-19 Boosts Digitalization Need * Glu Mobile Sinks On $100M Public Offering Announcement * Microchip Gains 7% After-Hours On Boosted Guidance; Top Analyst Ups PT * Cheesecake Factory Spikes After-Hours As 75% Sales Recaptured
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Shares in Microchip Technology (MCHP) surged 7.4% after-hours on Tuesday, after the company boosted its guidance for net sales and earnings for the 2021 fiscal first quarter as Covid-19 disruptions ease.Microchip now expects consolidated net sales for the June quarter to be $1.247 billion – $1.326 billion, or between flat and down 6% sequentially. That’s versus prior guidance of $1.194 billion – $1.3 billion (down between 2% and 10%).GAAP earnings per share is now expected to be between $0.25 and $0.39 and non-GAAP earnings per share is expected to be between $1.35 and $1.53. The original guidance for GAAP earnings per share was $0.13 to $0.31 with non-GAAP at $1.25 to $1.45.“With two months of the quarter behind us, our business is performing better than we expected during our May 7, 2020 earnings conference call. COVID-19 related supply chain disruptions which were primarily in Malaysia and Philippines have eased. We have begun to make up for lost production and expect to continue to gain ground through the end of this quarter,” cheered Steve Sanghi, Microchip’s CEO.“Our customers’ factories in China are fully back to work. Some of our other customers’ factories in Europe and North America have also started to reopen, including automotive factories where we saw the largest demand destruction,” he added.Shares in Microchip are currently trading down 7% year-to-date. However the stock boasts a bullish Strong Buy analyst consensus, with both Mizuho Securities and Rosenblatt reiterating their buy ratings on June 2. (See MCHP stock analysis on TipRanks.)Mizuho’s Vijay Rakesh also ramped up his MCHP price target from $92 to $105 (8% upside potential), citing improving auto-industrial and 5G base station trends after a challenging few months.“We continue to believe MCHP can leverage costs and achieve its target 63% GMs over time, and its broad customer base and product mix are competitive advantages as a potential 2H re-opening positions well from depressed levels” he wrote.Related News: AMD Can Keep the Rally Alive, Says Top Analyst Lyft Rises 5% After-Hours On Strong May Performance MongoDB Earnings Preview: Analysts Looking For Beat, Raise Quarter More recent articles from Smarter Analyst: * Glu Mobile Sinks On $100M Public Offering Announcement * Zoom Lifts Full-Year Sales Guidance As Quarterly Revenue Balloons 169% * Cheesecake Factory Spikes After-Hours As 75% Sales Recaptured * Lyft Rises 5% After-Hours On Strong May Performance