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In announcing the fiscal Q2 results that led to the shares decline, Zoom also lowered its fiscal FY 2023 projections.
Shares of software company Zoom Video Communications (NASDAQ: ZM) closed down 16% due to gloomy forecasts for fiscal FY 2023. The stock plummeted about 24 hours after the company announced its fiscal Q2 results. According to the highlights, the software company missed analysts’ revenue estimates, which led to the decline in shares. Zoom said revenue for the quarter was $1.10 billion, lower than the expected $1.12 billion. Chief Financial Officer Kelly Steckelberg stated the factors behind the lower-than-expected revenue for the fiscal Q2. He referred to the strengthening of the US dollar and the performance of online businesses. Steckelberg added that sales weighted to the backend of the quarter to a lesser extent.
Reduced Fiscal FY Guidance Causes Zoom Shares Plunge
In announcing the fiscal Q2 results that led to the shares decline, Zoom also lowered its fiscal FY 2023 projections. For the full fiscal year of 2023, the software company expects revenue to fall between $4.385 billion and $4.395 billion. The estimation for non-GAAP income for the year is between $1.440 billion and $1.450 billion. Also, Zoom is looking forward to between $3.66 and $3.69, with approximately 307 million weighted average shares outstanding in its non-GAAP diluted earnings per share for the full fiscal year. The communications technology company blamed economic conditions for lowering its forecasts.
Amid the shares loss and reduced projections for the fiscal FY 2023, Zoom got a stock downgrade from Citi analysts. Analysts of the investment banking group stated that the guidance was worse than expectations. In their words, the outlook was “much worse than we feared.” They added:
“While Q2 suffered many of our concerns that drove our recent downgrade, including SMB/Online pressure+margin risk, we underestimated the severity.”
Furthermore, analysts from global financial services firm BTIG also downgraded the company’s shares after Zoom dialed back on the fiscal FY estimate. They explained that “the pullback in FY 23 profitability and FCF is somewhat concerning as topline growth slows further.” As such, the analysts downgraded Zoom’s shares to “Neutral.”
“We have implemented initiatives focused on driving new online subscriptions, which have shown early promise but were not enough to overcome the macro dynamics in the quarter.”
Zoom Stock in the Red after Lockdown Surge
Zoom was one of the companies that benefited hugely during the coronavirus pandemic. With the world on lockdown, companies resorted to virtual meetings and general communications to keep their businesses moving. Zoom onboarded several new users and recorded a significant increase in active users. Also, users spent more time on the platform during the lockdown. However, ZM has been on a steading loss since the past year. The company has lost more than 76% in the last 12 months and dropped 55.78% since the year started. In addition, Zoom stock has fallen 13.80% in the last three months and plunged 18.95% over the past month. The communications technology company’s stock has declined 25.52% in the last five days.