100420 published
1:01 The Origins
CEO: Eric Yuan
WebEx, key player in video conference software - acquired by CISCO in 2007 $3.2B
became VP of engineering
small competition at that time
Left WebEx
Raised $3M in 2011 for Zoom
Launched in 2013
5:57 Is that a unicorn?
7:26 Success in turbulent times
Zoom is currently worth $157.60 a share (as at March 2020)
Market cap: currently valued at $43.56B
So what this means is that when you’re buying a share of Zoom at $157.60, you are essentially buying a company at $43.56B valuation.
This $43B valuation reflects in a PE ratio of 1,740 (which is insane).
If we look at the average PE ratio throughout the whole S&P 500, it is currently at 16.71
(But tech stocks can be 50-60s)
(Bloomberg - Zoom Video Extends 2020 Rally)
So we can use their analyst expected earnings about 44 cents per share and revenue of $917M:
Shares outstanding: $111.8M
x 44 cents per share
= Earnings of about $49M (forecasted forward-looking earnings)
Which is more than what the company reported for 2020 of $25.31M in earning, that's about double.
And if we go back all the way to 2017, we can see that the revenue was only $60.8M, and just look at how fast this company is experiencing growth.
And growth companies are quite often valued highly in our current market conditions.
Current market valuation: $43.6B
divide by projected earnings of $49.1M
= 888
So that means that even within the next year, if they do achieve that $49M in earnings, the company right now will still be valued at a PE ratio of 888 (which is insane).
= If you were to buy the whole company of Zoom right now at $43B valuation, it would take you 888 years, with earnings of $49M a year to make your money back.
Profit and Loss
Sales, general and administrative expenses: $427M
That means that the total operating income after all the expenses was only $13M
So they had a gross profit of $507M but it costs them around $495M to generate that profit, and most of that was due to this company having to market. They are doing aggressive marketing.
Zoom has to spend a lot of money on marketing just to get new clients into the door.
Profit/Operating margin: 2%
Meaning they earn 2% profit margin on their revenue they actually make (= earn 2% of their revenue)
Balance Sheet
We can see that their total cash position from last year has increased dramatically. They now have $855M in cash
Now, I do believe that this was because the company diluted and raised money by selling shares to the open stock market.
Regardless, the company is now sitting on about $1B in total current assets, which is up almost 400%.
Activity of the insiders
(when insiders are selling shares)
Eric Yuan (CEO) - sold $7.5M worth of shares on 17/03/2020
Scenario 1:
Current market cap: $43.56B
divide by Hypothetical PE ratio: 60
= $728M in earnings
divide by Operating margin: 5%
= $14.5B in total sales (revenue)
In terms of actual business - Scenario 1
(per Zoom website)
In order for this company to generate $14.5B in revenue
divide by $27 (their highest price package)
= 539M businesses (how many packages Zoom needs to sell to meet that $14.5B in revenue)
15/09/2020
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