The coronavirus pandemic is crushing the United States yet again. Wall Street witnessed a slump yesterday, as an uncomfortable number of increases in cases were reported in the United States and Europe. The Dow Jones Industrial Average closed 650 points (or 2.3%) lower, posting the worst day since early September. The country witnessed its two worst-ever days of infection over the last weekend.
There have been clear signs of a new wave of the pandemic in the United States, which is believed to worsen as the weather gets colder. As of October 24th, there was a weekly average of 23 infections per 100,000 residents, surpassing the 20.5 peaks in mid-July during the second wave of the coronavirus pandemic’s domestic toll.
Consequently, the stay-at-home stocks have been receiving attention and the coronavirus is functioning like a tailwind for companies like Zoom Video Communications (ZM), DocuSign (DOCU), Peloton Interactive (PTON), and Roku, Inc. (ROKU).
Zoom Video Communications, Inc. (ZM)
ZM engages in the provision of video-first communications platforms. It connects people through frictionless video, voice, chat, and content sharing, and enables face-to-face video experiences in a single meeting across disparate devices and locations. With remote working becoming a necessity, ZM has gained huge market share within a short period because of its efficient platform that helps people meet remotely.
ZM’s popularity led to very inventive hacking earlier this year, causing thefts of private data from user devices. However, the quick developments within the company are enabling enterprises to safely engage with their employees and customers. ZM has recently announced new end-to-end encryption (E2EE) for users globally, free and paid, for meetings with up to 200 participants. The company has also partnered with Lumen Technologies Inc. (LUMN) to offer ZM’s product as part of LUMN’s Unified Communications and Collaboration Suite to their large and growing base of customers across the globe.
The demand for ZM’s products has increased exponentially since the onset of the pandemic. At the end of the fiscal second quarter ended July 2020, ZM had approximately 370,200 paid customers. This implied a 458% increase compared to the year-ago quarter. Total revenue of $663.5 million was up 355% year-over-year as ZM added nearly 988 customers contributing more than $100,000 to its trailing 12 months revenue.
EPS for the last reported quarter came in at $0.63, improving 3050% year-over-year. ZM has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The company strives to deliver a world-class, frictionless, and secure communication experience for its customers across locations. Hence, analysts expect current year EPS to rise 611.4% compared to the year-ago value.
The stock closed yesterday’s trading session at $517.79 with a year-to-date gain of 661%. It has recently hit its 52-week high of $588.84 and is presently trading 12.1% below the high. The stock is up more than 280% in the past six months.
How does ZM stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
B for Overall POWR Rating.
It is ranked #5 out of 54 stocks in the Technology – Services industry.
DocuSign, Inc. (DOCU)
DOCU specializes in developing and marketing e-signature technology and solutions that enable businesses to digitally prepare, execute, and act on agreements. It provides cloud-based transaction products and services in the United States and internationally. DOCU’s platform has 350+ pre-built integrations with popular business apps. It has more than 500,000 customers and hundreds of millions of active users in over 180 countries.
Amid increasing demand for solutions that enable remote completion of agreements, DOCU has recently released DocuSign Analyzer, the AI-powered contract analytics solution designed for incoming agreements.
Moreover, DOCU acquired an Austin-based start-up, Liveoak Technologies in July 2020. In May, it also completed the acquisition of Seal Software, one of the leading contract analytics and artificial intelligence (AI) technology providers. Both of these acquisitions marked a step toward bringing the benefits of AI to the digital transformation of the agreement process.
Total revenue for the fiscal second quarter ended July 31, 2020, increased 45% year-over-year to $342.2 million. The company has been exponentially growing its customer base as billings of $405.7 million increased by 61% compared to the year-ago quarter, depicting the need to agree electronically and remotely. The company reported subscription revenue of $323.6 million, rising 47% year-over-year.
Non-GAAP EPS for the last reported quarter came in at $0.17, beating the consensus estimate by 112.5%. DOCU’s earnings surprise history looks impressive as well with the company beating street estimates in each of the trailing four quarters. Moreover, the company has been working on the Agreement Cloud opportunity and believes that it is increasingly becoming an essential cloud-software platform for organizations of all sizes. Hence, analysts expect the current year EPS to rise by 87.1% compared to the year-ago value.
DOCU gained 205.3% year-to-date to close yesterday’s trading session at $220.17. The stock is presently trading 24.1% below its all-time high of $290.23. DOCU is up more than 110% in the past six months.
Under POWR Ratings, the company has been accorded an “A” rating for Industry Rank. Within the 96-stock Software – Application industry, it is ranked #38.
Peloton Interactive, Inc. (PTON)
PTON is an interactive fitness platform that engages in the operation of in-studio fitness classes, fitness clubs, at-home fitness equipment & content, and health & wellness apps. The company has a community of more than 3.1 million members worldwide. It operates through the following segments – Connected Fitness Products, Subscription, and Other.
PTON announced the introduction of the Peloton Bike+ and the new Peloton Tread last month, growing its portfolio of immersive, connected fitness products and experiences. The product suite now offers members new ways to combine cardio and strength training, while adding more affordable entry points. The company also announced the formation of the Peloton Health and Wellness Advisory Council, which will work to positively impact the physical, mental and emotional well-being of PTON’s community of members.
PTON will release first-quarter fiscal 2021 ended September 2020 results after the market closes on November 5th. In the fourth quarter ended June 2020 total revenue grew 172% year-over-year to $607.1 million. Connected Fitness subscription workouts increased 333% in the quarter to over 76.8 million, averaging 24.7 monthly workouts per Connected Fitness subscription, compared to 12 in the same period last year.
EPS for the last reported quarter came in at $0.27 compared to a quarter-ago loss of $0.2 per share. As the global communities continue to battle the COVID-19 pandemic, many people have been committing to improving their health due to quarantine and dedicating themselves to a serious fitness regimen. Hence, analysts expect the current year EPS to rise 137.5% year-over-year.
PTON closed yesterday’s trading session at $118.10, gaining 317% year-to-date. It has recently hit its 52-week high of $139.75 and is presently trading 15.5% below the high. The stock is up nearly 276% in the past six months.
PTON’s strong fundamentals are reflected in its POWR Ratings, it has a “Buy” rating with an “A” in Trade Grade and Industry Rank, and a “B” in Peer Grade. Within the Consumer Goods industry, it’s ranked #8 out of 34 stocks.
Roku, Inc. (ROKU)
ROKU offers a streaming platform for delivering entertainment to the television. The company operates in two segments — Platform and Player. It provides its product and services through retailers and distributors, as well as directly to customers through its e-commerce website.
ROKU introduced the all-new Roku Ultra last month, specifically designed for avid streamers that offer the best performance of any Roku player for less than $100, and also unveiled the Roku Streambar for streamers looking to add powerful streaming and premium sound to any TV. The company has also rolled out Roku OS 9.4 last month that offers customers new ways to access content quickly with a range of performance enhancements. Furthermore, ROKU added 3.2 million incremental accounts in the second quarter to reach 43 million active users.
ROKU will release the financial results of the third quarter ended September 2020 on November 5th. The company reported impressive second-quarter results with exceptional account growth. Net revenue rose 42% year-over-year to $356 million as the Platform segment revenue increased 46% year-over-year to $245 million. Average Revenue Per User (ARPU) stood $24.92, up 18% year-over-year. Cash flow from operations stood at $34 million whereas free cash flow for the firm grew 131% year-over-year to $15.4 million.
The company reported a loss of $0.35 per share for the last reported quarter, improving from the quarter-ago loss of $0.45 per share. This represents an earnings surprise of 30%. Moreover, ROKU delivered earnings surprises in three of the trailing four quarters. ROKU delivered strong growth in our ad business, particularly relative to the overall TV ad market that was down. Hence, the current year revenue is expected to grow 41% year-over-year. The EPS is estimated to grow 29% next year.
ROKU closed yesterday’s trade at $220.08, gaining more than 64% year-to-date. It has recently hit its 52-week high of $239.14 and is presently trading just 8% below the high. The stock is up nearly 82% in the past six months.
ROKU’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade. Among the 30 stocks in the Technology – Hardware industry, it’s ranked #7.
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ZM shares were trading at $530.66 per share on Tuesday afternoon, up $12.87 (+2.49%). Year-to-date, ZM has gained 679.92%, versus a 6.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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