This has been the year of mega IPOs. Some of the stocks that have been listed this year have managed to fly at a breakneck pace. One such company is online video communication company Zoom Video Communications Inc (NASDAQ:ZM). In April this year, the company listed its stock at $35 but it zoomed to $65 on the day of its IPO and currently, the stock is trading at more than $96.50 (closing price on July 22) after hitting an all-time high of $107.34 in mid-June.
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It is an incredible rise for the company and perhaps for good reason. The cloud-based video conferencing software claims to provide a user-friendly and higher quality experience to its easier. It is in competition with behemoths like Microsoft’s Skype and WebEx, which belongs to the Cisco System.
Strong Industry Performance
Considering the fact that that the video conferencing software market could grow to $20 billion in the next four year, it goes without saying that the opportunity is there for the company to grow considerably. In the quarter that ended on April 30 this year, the company reported revenues of $122 million, which reflected a year on year rise of 103%.
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The operating expenses rose 92% year over year to $96.3 million, while on the other hand, the gross profit margin touched 80.2%. The earnings per share after all adjustments were pegged at $.03. It has also managed to generate free cash flow to the tune of $15.3 million. The fact that the company is profitable makes it an attractive option for investors.
Key Analysis
When it comes to actually purchase the stock, investors have to consider a lot of options but at the end of the day, the most important metric is future growth. At this point of time, Zoom is growing at a faster rate than the industry. The company can grow its revenues strongly over the coming quarters. That being said, the sector is a cyclical one and there might be ups and downs along the way, which is why investors who are prepared to accumulate the stock over a long period should be interested in this stock.
