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How Come Zoom’s Stock Fell Today? Software Company Is Hampered by a Weak Q2 Outlook

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Zoom Video Communications

Tuesday saw a nearly 17% decline in Zoom Video Communications (NASDAQ:ZM) stock after the communications software provider revealed second-quarter results that fell short of expectations and offered flimsy guidance.

Zoom (ZM) stated that it anticipates its third-quarter earnings on an adjusted basis to be between 82 and 83 cents per share, with revenue in the range of $1.095B to $1.1B. In the third quarter of 2021, Zoom (ZM) generated revenue of $1.051B and earned $1.11 per share, excluding one-time items.

Zoom (ZM) reported earnings of $1.05 per share for the quarter ending July 31 on revenue of $1.1 billion, beating analysts’ estimates of a profit of 93 cents per share on $1.12 billion. Zoom (ZM) earned $1.36 per share, excluding one-time items, on $1.02B in revenue during the same quarter last year.

A few analysts were concerned about Zoom’s (ZM) capacity to continue growing as a result of the weaker-than-expected performance, and one Wall Street company downgraded shares.

BTIG analyst Matt VanVliet downgraded Zoom (ZM) shares from buy to neutral, citing the company’s ongoing macro headwinds, which include the impact on its web business and the EMEA region.

We are downgrading shares of [Zoom] to Neutral given much lower near-term expectations since the overall decline in [fiscal 2023] profitability and [free cash flow] is somewhat alarming as topline growth slows even further, VanVliet stated in a note to clients.

Tiger Global Management, a hedge fund, recently revealed that it sold its Zoom (ZM) shares and made a number of other modifications to its portfolio during the second quarter.

Citi’s anticipation of Zoom’s earnings announcement on August 22 was not as positive back on August 16. Tyler Radke, a tech analyst at the investment bank, downgraded Zoom stock’s rating from Neutral to Sell and noted that it is “high risk.” Due to this, Zoom stock dropped more than 3% in pre-market trading.

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