Breaking down the video-chat icon ahead of another earnings report
It's been quite a run for Zoom Video Communications Inc (NASDAQ:ZM). The video-chat staple quickly entered the Covid-19 lexicon in March 2020 as we all scrambled for ways to stay connected while staying at home or at work. Naturally, investors gravitated to the equity in the early days of the pandemic, with no end to its near-daily use in sight. But as time wore on, and a number of effective vaccines have people starting to venture out of their homes, the word itself has become less and less of a daily utterance.
Wall Street's infatuation with Zoom began to wane shortly after the equity hit its all-time high of $588.84 last October. Rumbling of positive vaccine progress from Pfizer back in early November devastated the stock, and later that month the stock was sunk yet again, as optimism over the future of stay-at-home stocks overshadowed a quarterly beat, stoked by drop in the company's profit margin.
That dramatic 15.1% post-earnings drop marked the worst the security has seen during its past eight next-day sessions. And with another report out just after the close today, investors are likely mulling over what's next for the company. The stock is suffering in the hours before its earnings event, last seen down 1.1% at $327.85, set to snap a three-day win streak staged late last week. Pressure at the $340 level has also kept a lid on the equity over the past two months, keeping it at a near 3% year-to-date deficit.
Circling back to post-earnings reactions, the stock has seen some wild swings during its past eight reports, including its 40.8% surge in September of 2020. The security has seen an average return of 14.5% during the past two years, regardless of direction -- slightly larger than the 11.7% move the options pits are pricing in this time around.
Naturally, options volume is running higher ahead of the event. Puts and calls are almost neck-and-neck, with 40,000 of the former and 43,000 of the later exchanged ahead of the event -- nearly double the intraday average. The two most popular positions are the 6/4 300-strike put and the 300-strike call in the same monthly series. Positions are being opened at both.
Short sellers, meanwhile, have been strengthening their positions. Short interest shot up 14.3% in the last reporting period, and now the 8.80 million shares sold short make up a hefty 27.4% of the stock's available float.
Sentiment among the brokerage bunch is split pretty evenly. Nine covering ZM consider it a "buy," and 10 call it a "hold" or worse. Meanwhile, the 12-month consensus price target of $426.02 is a near 30% premium to current levels.