Zoom Video (ZM) to Report Q3 Earnings: What’s in Store?

Zoom Video Communications ZM is set to release third-quarter fiscal 2020 results on Dec 5.

For the quarter, the company expects total revenues between $150 million and $156 million. Non-GAAP earnings are expected to be approximately 3 cents per share.

The Zacks Consensus Estimate for earnings stayed at 3 cents per share over the past 30 days. The consensus mark for revenues is pegged at $156.2 million.

Let’s see how things are shaping up for this announcement.

Factors to Watch

Zoom’s expanding customer base is expected to have aided the top line in the to-be-reported quarter. At the end of second-quarter fiscal 2020, the company had roughly 66,300 customers (having more than 10 employees), up 78% year over year.

Moreover, new customers accounted for 61% of the company’s year-over-year subscription revenue growth. The remaining 39% was owing to additional purchases from existing customers.

The U.S. Federal Risk and Authorization Management Program (FedRAMP) authorization received by Zoom in May is expected to have played a significant part in this regard. The authorization allows the U.S. Federal Government agencies and contractors to securely use Zoom for video meetings, API integrations and more.

Additionally, the company has a strong partner base that includes the likes of salesforce.com, Logitech LOGI, Lenovo and Verizon. This is expected to have benefited the company in winning new customers.

However, increased sales & marketing expenses are expected to have hurt profitability in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a positive Earnings ESP along with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates.

Zoom has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of companies, which, per our model, have the right combination of elements to post an earnings beat this season:

Costco Wholesale COST has an Earnings ESP of +1.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adobe Systems ADBE has an Earnings ESP of +0.12% and a Zacks Rank #3.

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