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Zoom saw a significant uptick in its user base and revenue in 2020 driven by the boosted demand in video communications as most people worked from home in the heat of the coronavirus pandemic.
The shares of American video communications service provider Zoom Video Communications Inc (NASDAQ: ZM) is seeing a good bounce following a new capital raised by the San Jose-based firm. As reported by the Motley Fool, the firm announced Tuesday that it plans to raise $1.5 billion in new capital from the sale of about 4.2 million new shares of its stock, a figure that was surpassed to $1.75 billion owing to an increase in demand, the company said. The latter capital raised was based on the sale of 5.1 million of its shares.
The deal looks good for Zoom as it now has more financial liquidity to push for product and services expansion. Tom Roderick, an analyst with Stifel Financial Corp (NYSE: SF) said that the capital boost will propound Zoom’s financial flexibility but the overall cap will have to be much higher in a bid to drive corporate expansions.
“While [the company now has] a sizable war chest, the cash alone doesn’t necessarily put potential targets like RingCentral or Twilio on the table without a huge component of stock in such a deal,” he wrote. “As Zoom builds out its global scale, a 10-figure war chest of cash will also be beneficial for aggressive infrastructure build-out, as needed.”
Zoom shares closed 2.19% higher to $364.63 per share on Wednesday with an additional 1.75% boost in today’s pre-market. Zoom reportedly has no long term debt positions and Roderick has a $450 price target on the stock with a hold rating.
Zoom saw a significant uptick in its user base and revenue in 2020 driven by the boosted demand in video communications as most people worked from home in the heat of the coronavirus pandemic. Although the competition has soared in recent times, the prospects of Zoom outperforming cannot be ruled out
Upbeat in Zoom Shares As its Zoom Phone Service Hits 1 Million Users
Since its Zoom Phone product was launched about two years ago, reports have it that the service has attracted over 1 million users and comes off as one investable opportunity for Zoom to develop.
“Zoom has made remarkable strides in short order with Zoom Phone,” Roderick said, noting that the service is just two years old. “Looking ahead, we expect Zoom to focus on expanding its relationship with current video customers gained from the pandemic and driving up-sell opportunities through the company’s growing product suite.”
While Zoom shares are showing good tickers following these developments, analysts believe that a well-targeted merger and acquisition push by the firm will further help accelerate its growth and presence in the emerging world of cloud-based communications.
“We would note the company has not said anything publicly about potential M&A, but that platform expansion, similar to what they have done with Phone, makes sense as a way to monetize their installed base,” said Morgan Stanley analyst Meta Marshall, “We continue to think that the 400-450 million enterprise customers are the most lucrative of potential customers, with application extensions in this area making the most sense to us.”
Zoom is aiming at beating its own annual record with a growth of over 760% from the end of 2019 the benchmark to beat.