During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Zoom Video Communications Inc (NASDAQ:ZM) Fatigue & Growth Forecasts. Here’s an excerpt from the episode:
Q3 2020 hedge fund letters, conferences and more
Zoom Video Communications Fatigue & Growth Forecasts
Bill: Here’s what I don’t understand on Zoom Video Communications. Okay. You’ve got huge growth this year, huge. 262%, okay, to $2 billion, we’re trading in 117 billion, so whatever. Lots of time sales for those that want to figure it out. You got them growing consensus is like 40% growth in 2024. Okay, why? 40% is a big number. What’s going to happen in 2024?
I’m looking at it, you got 300% this year, okay, granted, everybody’s locked in. Then next year, we’re somehow going to grow 34% off that base, as if people aren’t using it like crazy right now. And then you come down to 21% and then you pop up to 40%. I’m sure they have some product that they’re releasing or something. I mean, these people aren’t stupid that are modeling it, but how are we going to grow 34% off of this space? Kids are in school on Zoom. You can’t do anything without being on Zoom. We’re going to go 34% of that base?
Tobias: It was one less as of yesterday.
Bill: I can’t wait to get the fuck off Zoom. You’ll see me zero times next year on it.
Tobias: Yeah.
Jake: [laughs]
Bill: Every corporate meeting is on Zoom right now. We’re going to grow off that base? I don’t know, man. I just don’t trust that. Maybe I’m the idiot.
Jake: Here’s the thing. It could work, but you don’t want to make that bet 100 times.
Bill: Yeah. I think that’s right. Your odds offered are really bad. Now, said the same thing last year. [crosstalk]
Jake: You said the same thing 200% ago.
Tobias: Do people get locked in– [crosstalk]
Bill: 200%, dude, it opened the year to $21.3 billion company, now it’s 117.
Tobias: Do people get locked into this– does this network effect eventually occur with everybody’s just on Zoom and it’s just easier to be on Zoom? What do you think–?
Bill: I’m sure a bull would tell you that, right?
Jake: No way, dude. Skype is just as good to me. Google Hangout or Google Meet or whatever, just as good. FaceTime? I mean, I don’t know, whatever, man.
Bill: Well, like all the people that are sitting at home that started a podcast now that are like recording on Zoom. I mean, think of how many things happened on Zoom, because nobody had anything else to do. We’re going to grow 34% off that base?
Tobias: It’s growing 40% between here and 2024. Or, it’s growing 40% in the year 20– 40% per year.
Bill: 2022. This is consensus of Bloomberg. 2022, the year ended 131. 2022, you’re looking at 34% revenue growth. The year ended 131, 2023, 21%. The year ended 131, 2024, 40%.
Tobias: Why does it take off?
Bill: I don’t know. This is what I’m asking.
Jake: Because you need that to get to this valuation.
Tobias: I think I see what I’ve been doing wrong. I’ve been fading[?] these things. I should have been compounding them, accelerating them, accelerating those metrics.
Jake: Yeah, rookie numbers. You need to bump up those rookie numbers.
Tobias: That’s what I’m doing [crosstalk] now.
Bill: If I was underwriting this thing, I’d be like, “Alright, so next year, we figure usage and everything falls off like 30%.” And I’d rebase my estimates from that.
Tobias: Well, maybe that’s what they’re doing.
Bill: I don’t know, you got 7.4 billion of sales, and the year ended 131, 2025. We’ll see, maybe it works. They are doing a lot in phones. I like their Investor Day, seems like a cool company. Better be, they’re selling a lot of dreams for $118 billion. If you don’t know how to sell it to the street, it’s crazy.
Tobias: Oh.
Bill: [laughs]
Jake: Sobering.
Tobias: How’s your Qurate-Zoom Video Communications bet going? Let’s get an update on that.
Bill: I don’t know. I think I’m winning. Who cares? I got two and a half years, man.
Tobias: Yeah, that’s fair. I just wanted to say the inflection point.
Bill: I think I’m pretty certain that Qurate’s ahead.
Jake: I think you’re ahead.
Tobias: It’s going to be tough now. There we go, that’s good. Chalk one up for the old value guys. Not we can take a knee, two and a half years to run on it, but let’s keep going.
Bill: I think [crosstalk] going to have a really good quarter. The stock market being up helps the wealth effect of the consumer. She’s at home. She probably needs some retail therapy. I think they got another–
Tobias: Doing Zoom Video Communications calls.
Bill: Yeah.
Jake: Between Zoom calls. [laughs]
Bill: She’s going to see David, forget about our pain. We’re just selling air fryers.
Jake: [laughs]
Tobias: All right, amigos. That’s right on full time. We’re all going to be here next week.
Bill: Yeah.
Jake: For better or worse.
[laughter]
Bill: That’s right. Yeah, maybe we will say something worth listening to next week.
Jake: Let’s redouble our efforts and come back with something a little better here.
Tobias: All right, fellas.
Bill: I had a great time.
Tobias: See you next week, folks. Ciao.
Jake: Cheers.
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