Bull, Bear Notes Pour in for Zoom Stock Following Earnings

No less than five analysts chimed in with bull notes

Deputy Editor
Dec 1, 2020 at 9:58 AM
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The shares of work-from-home staple Zoom Video Communications Inc (NASDAQ:ZM) are down 11.5% to trade at $422.23, despite the company reporting a third-quarter earnings and revenue beat. Specifically, Zoom earned 99 cents per share on $77 million in revenue, and has experienced an incredible year due to the pandemic forcing work and schooling to be done remotely; but investors expect the company's accelerating revenue growth to moderate quarter-over-quarter. Concerns arose from the company's gross margins for 2021, as the number of free users adds to maintenance costs.

In response, no less than five analysts raised their price targets on ZM, the largest coming from Citigroup, which raised it to $467 from $377. Still, the negative price action also pushed at least two analysts to chime in with bear notes, most notably RBC, who cut their price target to $550 from $600. Coming into today, analysts were evenly split on Zoom stock, with 10 calling it a "buy" or better, and 10 saying "hold" or worse. Additionally, the consensus 12-month price target sat at $483.85 -- a 9.2% premium to last night's close. 

On the charts, the equity has fallen off a bit since hitting an all-time high of $588.84 on Oct. 19. Despite the dip, the shares' 80-day moving average contained the pullback a trendline that hasn't been breached on a closing basis since January. And as a reminder, even with today's post-earnings fall, ZM remains up an astounding 525%.

Options traders are coming out of the woodwork today in droves. In just the first half hour of trading, over 96,000 options have changed hands, volume that's triple the average intraday amount. The weekly 12/4 400-strike put is most popular, with new positions being opened.

There's still plenty of optimism in the stock's options pits. This is per ZM's 10-day call/put ratio of 2.22 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the slightly elevated 78th percentile of its annual range. This implies that while calls have been picked up at a much faster-than-usual clip over the last two weeks.

Lastly, the equity's Schaeffer's Volatility Scorecard (SVS) ranks high at 91out of 100, meaning ZM has tended to exceed these expectations during the past year -- a boon for options buyers.

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