Zoom drops 5% as Argus says 'pandemic star has fallen to Earth'
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Zoom Video Communications (NASDAQ:ZM) shares fell by 5% Friday in the wake of Argus analyst Joseph Bonner cutting his rating on the company's stock after Zoom (ZM) lowered its fiscal year earnings and revenue forecast.
Bonner cut his rating to hold from buy, saying that "the former pandemic star has fallen to Earth" and has been "battered" by recent selloffs in the tech sector and broader market. Bonner said that Zoom (ZM) has suffered as "market sentiment has turned against smaller tech companies with low or shrinking profitability."
Earlier this week, Zoom (ZM) said that for all of its current, 2023 fiscal year, it expects to earn between $3.66 and $3.69, excluding one-time items, on revenue in a range of $4.39B to $4.4B. Bonner said the problem with that forecast is that the midpoint of Zoom's (ZM) earning outlook implies a 27% decline from a year ago. Also, the midpoint of the company's revenue forecast suggests growth of 7%, while Zoom (ZM) had earlier said it expected sales to rise by 11% over last year's results.
Bonner said Zoom's (ZM) new forecast "reflects both negative currency effects and macroeconomic [business] deterioration."
Bonner also said that while Zoom (ZM) continues to add business customers "the number of those additions is actually declining [which is] not a promising sign even allowing for some post-pandemic [business] deceleration."
In addition to its outlook, Zoom (ZM) also gave second-quarter results that failed to meet Wall Street's expectations.