A company you probably never heard of until coronavirus hit!
Admit it, since we've all been locked in doors at some point you've used zoom. A quiz night with some mates? A chat with the girls? A conference call with work? It's a simple way to get large groups together online for free.
If you've only dabbled with it for a quiz night you wouldn't have paid a penny. The free plan is great for times like these so how do they make money?
Zoom was founded in 2011 and is targeted at business users. They have a variety of plans available and lots of add ons. They are also priced very reasonably so even the smallest start ups won't mind forking out for a monthly plan, this makes them appealing to a broad spectrum of business users.
Let's look at the financials:
At the end of Q4 (31/01/20) $ZM had a gross profit margin of just over 80% which is incredible! (gross profit $507 million/total revenue $622 million)
R&D costs are increasing in pretty consistent manner with a growing company. We have to remember, this company is only 9 years old and only began turning a profit in 2019.
Net earnings are running low at around 4% but the selling general and administration costs have put a large dent in the profit margin. This could be down to large advertising campaigns to help build the brand. That being said they turned over a healthy $25 million in net income.
Debt to shareholders equity is around .5 which is excellent. They have over a billion dollars in assets & the shareholders equity has grown 4 fold in the last year to over $830 million.
Sometimes it can be difficult to financially analyse a newish company with only a few years of data but ZM looks very positive.
Will the hype last?
This is the million dollar question (literally). The world will change forever on the back of this pandemic. A lot of friends who work in offices are already being told that they will be working from home a lot more in the future, even once the restrictions are lifted. With the reasonable monthly fees, ease of use, and growth during this pandemic this will surely secure Zoom as a brand name which will be seen in offices around the world for a long time into the future.
Do I believe the hype? Yes, I do.
I currently hold positions in Zoom and this is not intended as a recommendation to buy. This is purely my opinion of the company.