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“This is not a temporary compensation they see”



Zoom reported fourth-quarter earnings that exceeded expectations. DA Davidson CEO Rishi Jaluria joins Yahoo Finance Live to discuss.

Video transcription

Welcome back to Yahoo Finance Live. Shares in Zoom, the video conferencing giant, are trading lower here today, although some big numbers were announced after the bell. They reassured the skeptics with another strong revenue report, which brought them two-day profits, so that one point reaches 15%. A little less now. Zoom’s revenue for the last quarter rose 369% to $ 882.5 million.

This was compared to the expected 81

1 analysts. Adjusted earnings per share also exceeded $ 1.22 per share compared to the expected $ 0.79. Strong quarter. Listen to what Zoom’s own CFO has to say about this.

KELLY STECKELBERG: Well, we have seen strong results in all aspects of our business. Our core meetings, channels, direct and online business have grown. As we announced yesterday, we have over 400,000 customers with over 10 employees. We also have strong ones – we saw a really strong performance from Zoom Phone, which has just turned two years old. And yesterday we announced that we have over 18 customers with more than 10,000 seats. Such a strong performance in this prestigious market.

Perhaps more importantly, the winner of last year’s Yahoo Finance Company of the Year award also predicts growth that will continue, although critics say our return to normal will hurt Zoom. So, for more information, I want to bring our next guest here, Rishi Jaluria. DA Davidson CEO is joining us right now on the split screen.

Rishi, when we look at the numbers they projected, is also better than expected. They say 900 million to 905 in the current quarter. That was above estimates at 829.5 million. So what do you think of this company that proves that doubters are wrong? That he won’t fall off a cliff here when we get back to the office?

RISHI YALURIA: Yes Thank you very much for having me. It’s always great to be on your show. Look, that was exactly my reading. Right? The doubters said, hey, it’s a little lightning in the pan.

Zoom has taken its full market opportunity forward and obviously the fact that they are talking about more than 40% growth in 2021, despite the fact that they have more than quadrupled their revenue in 2020, I think is actually quite amazing about me. And that really speaks to the fact that this is not a temporary benefit that they see. Future work will be very hybrid in nature, and Zoom really allows that to happen.

Right? This allows the hybrid workplace and this will be a critical part of that going forward. So I think the numbers show that this will continue to grow in a really strong pandemic of post clip and will make it very, very profitable. Right? Because you also received it for very strong profitability next year.

Rishi, we saw – we heard from the company that it is very clear that they believe they are far beyond this video conferencing platform at the moment. However, a significant part of the revenue still comes from this. You have a pretty aggressive price tag of $ 600 per share. What are the other services outside of video conferencing that you think will come to this kind of price and evaluation?

RISHI YALURIA: Yes, definitely. Look, I think there are three categories I would put it in, right? One is right next to the video, and this is where you can take advantage of the fact that they have, in my opinion, the best video conferencing technology in other uses, which includes embedding it in your applications. It includes things like telemedicine, education, and event management, right?

And this is a big piece of it. The second is the neighboring areas where they are already, and there you heard Kelly talking about Zoom Phone in the video you just showed before. And I think there’s still a huge opportunity to continue, even within the existing customer base, right?

Only 2% of existing customers use Zoom Phone today. And there is a large base for installing Cisco and Avaya so that they can be released. And then the third category, I think there will be future areas within broader corporate communication and collaboration that I think will expand and that will include things like channel-based messaging, right?

Which would compete more directly with Slack. These would be things like email, calendar, even contact center. And then this can happen both internally and through mergers and acquisitions, right?

Because they have more than $ 4 billion in money that they can invest in the balance sheet. So I really think these three areas are where I can reach my $ 600 goal. And really, if we think that some of these things in the third category that I talked about, they fly really beyond that.

Yes I want to talk about this price target. Let’s also talk about the evaluation, because it seems that right now it would be a difficult time to design evaluations there, as we see that a kind of technology is taking a hit not only today, but also last week in sales. Increases what?

29 times the value of the enterprise for the expected profit for the calendar year 2022. Your target would assume 39 times, right? I mean, how can this change if investors suddenly start to deviate from some of these technological names?

RISHI YALURIA: Yes, and that’s a fair question. You know, look, I’m going to point out number one, there is – this is not the most expensive stock in the software. You know, I can name at least eight or 10 others that have a larger multiple, despite the fact that Zoom is the fastest growing of each.

But I think number two is that you know, multiples are a bit of a shortcut, right? We have to think really long term, what does this company look like? And that’s something I rarely see in software, right?

It reminds me of some earlier days of Salesforce, or ServiceNow, or Viva. And if we think about how big a company can be and really how profitable it can be in five years, in 10 years, I think it can be more than a justification for the current price target I have. And again, in addition, even if there is a greater retreat in technology.

Rishi, who do you think poses the biggest threat to Zoom’s growth history right now? Is it Slack and Salesforce? Is it Microsoft? How do you look at the competitors?

RISHI YALURIA: This is Microsoft, right? And if we had this conversation about another software company, the answer would also be very likely Microsoft. They are obviously becoming very aggressive with Microsoft Teams and have achieved a lot of success and cohesion, especially during the pandemic.

And part of what I think – There are two reasons, right? First, they give it away for free to anyone who is an Office 365 customer. But number two is the packaging strategy, right? And the idea is that Microsoft Teams is a combination of video conferencing and messaging and content management, right?

So you get some Zoom and Slack and Dropbox in one solution. And that’s why I think it’s really important for Zoom to expand into a wider communication platform, instead of just being a video conferencing tool, and that’s obviously the direction they’re going. But Microsoft is absolutely the biggest threat to them.

Rishi Jaluria, CEO of DA Davidson, it’s good to talk today.


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