Zoom beats on earnings and revenue but share price drops

​​​Zoom: a swallow does not a summer make

​​Key takeaways:

1. ​Zoom exceeded expectations: Zoom's second quarter (Q2) earnings and revenue surpassed estimates, leading to a sharp rally in the company's share price in after-hours trading.
2. ​The video-calling software company raised its outlook and full-year guidance, including adjusted earnings per share and revenue forecasts for the fiscal year 2024.
3. ​Zoom is working on optimizing its spending, particularly in areas such as cloud services, while slowing the growth of sales and marketing expenses as it adjusts to a post-pandemic environment.
4. ​Zoom's enterprise segment remains strong, leading executives to raise their forecast for the future. The company also clarified changes in its Terms of Service to reassure users that their data will not be used to train AI tools.
5. ​The technical picture will only improve from a medium-to-long-term perspective if the Zoom share price were to rise and close above the April and July peaks at $74.41 to $75.10 on a weekly chart closing basis. Only then could an advance towards the February peak at $85.13 be envisaged.

​Zoom Q2 results review

​Mostly retail traders were buying Zoom shares after-hours with these rising by nearly 12% as the video-calling software provider once again beat estimates on earnings and revenue.

​The overnight rally in the Zoom share price was shorty-lived, though, as large short-sellers entered the fray and pushed the share price down 3% at the open.

​Excluding items, Zoom reported a Q2 profit of $1.34 per share, compared to a target estimate of $1.06, and the company also pushed up its full-year guidance.

​Revenue for the quarter ended the 31st of July rose 3.6% to $1.14 billion. For the full fiscal 2024 year revenue has been raised up to $4.48 to $4.49 billion, up from $4.39 billion for 2023.

​The company now sees $4.63 to $4.67 in adjusted earnings per share (EPS), up from $4.30.

​The company's enterprise side looks robust, leading executives to raise their forecast for the future, while the consumer part is not as strong as before.

​Zoom said that its customers can start free trials for automated meeting summaries without recording calls and that it invested in artificial-intelligence startup Anthropic.

​The videoconferencing company clarified that user data from Zoom calls and chats will not be used to train its AI tools, reflecting changes in its Terms of Service.

​Despite beating estimates Zoom shares remain in negative territory for the year as large short-sellers used the results to add to their bearish positions. At present the Zoom share price is down over 3% year-to-date compared to the Nasdaq 100’s around 38% rise.

​How to trade Zoom

​IG client sentiment, which can at times act as a contrary indicator, is showing 96% of clients with long positions in the Zoom share and only 4% with short positions (as of 13:15h BST, 22/08/2023) with several clients buying the share in extended hours trading.

​IG Sentiment

​According to Refinitiv Eikon, 26 analysts prefer to “hold” Zoom stock, with one rating it as a “strong sell”, 5 a “buy” and 2 a “strong buy” with a median long-term price target of $80.00.

​Analyst ratings

​Given the better-than-expected Q2 company earnings several of these analyst ratings may soon be changed, though.

​Zoom – technical outlook

​Having come off its lofty heights of $588 in October 2020, the Zoom share price has been bumbling along its late 2019 levels of around $70 per share since late last year.

​The 55-week simple moving average (SMA) at $69.69 thwarted a previous rise in the Zoom share price over three weeks in July but may be exceeded this week as the company beat expectations.

​Zoom Weekly Candlestick Chart

​The after-hours rally in the Zoom share price briefly pushed the video-calling provider’s shares above the minor psychological $70 mark to the 200-day SMA at $70.46 before collapsing at the official open as short-sellers pushed the share price down.

​The 200-day SMA as well as the April and July peaks at $74.41 to $75.10 would need to be overcome on a weekly chart closing basis for the Zoom share price to form a medium-term bottom and for the February high at $85.13 to be back in the frame.

​Zoom Daily Candlestick Chart

​Support can be seen between the July and last week’s lows at $64.33, a fall through which would engage the early and late-May lows at $61.56 to $60.45.

​The post-earnings after-hours rally was nothing but a damp squib and further sideways trading with a bearish bias between roughly $60 and $75 remains in store for the days ahead. Below the $60 mark possibly beckons the psychological $50 region.