Zoom Video Communications Inc (NASDAQ:ZM) shares could rise if its fourth quarter results due after the market close include an upside surprise against weak expectations, an analyst at TickMill Group says.
The Street is expecting the San Jose, California-based communications company to report earnings per share (EPS) of $0.81 and revenue of $1.1 billion for 4Q.
TickMill Group market analyst James Harte noted that there has been some market chatter regarding the potential of a negative EPS which, if seen, would be a heavy blow for the company and would likely see shares come off sharply.
READ: Zoom CEO takes 98% pay cut as he lays off staff
“Given the weak expectations, however, any surprise upside today will be strongly bullish for the stock,” Harte said.
He pointed out that the company has struggled over the last year or so as the post-pandemic recovery has seen a drop in demand for its video-conferencing products.
“With companies and schools seeing a broad return from work-from-home conditions, demand has dried up steadily, reflected in projections for today’s EPS to be just half of the $1.60 figure seen a year prior,” he said.
Harte said traders would also be focused on Zoom’s 2023 outlook.
“This month the company announced that it will reduce its workforce by around 15% in line with the ‘uncertainty of the global economy’,” Harte said. “Traders will now be keen to hear further details with downside risks should CEO Eric Yuan strike a cautious tone.”
Shares of Zoom had edged higher ahead of its results, up 0.3% at US$74.18 shortly after the market opened.
Contact the author at emily.jarvie@proactiveinvestors.com
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