The stock fell 9% in early trading Tuesday after the company cut its full-year sales forecast and posted its weakest quarterly growth, prompting at least six brokers to slash their price targets.
The company, which has become a household name during lockdowns thanks to the popularity of its video conferencing tools, is trying to reinvent itself by focusing on business, with products like cloud calling service Zoom Phone and conference hosting provider Zoom Rooms offering.
However, analysts believe it will take a few more quarters before the company sees any turnaround as growth in its core online unit slows and competition from Salesforce’s Microsoft Corp, Webex and Slack teams builds.
“Zoom had a fundamental flaw – it had to spend a lot to maintain market share. Spending to maintain market share, rather than increase it, was never a good thing and was a sign of trouble ahead,” said Sophie Lund-Yates. , equity analyst at Hargreaves Lansdown.
The company’s operating expenses jumped 56% in the third quarter as it spent more on product development and marketing. Adjusted operating margin fell to 34.6% from 39.1% a year ago.
Some brokerages believe the acquisitions could help jump-start Zoom’s growth, but CEO Eric Yuan said on a post-earnings call that he still sees transactions come under scrutiny for new business.
Ryan Koontz, analyst at Needham & Co.