ZM - Is the Covid boomer gonna zoom zoom its way down?

Mentions for starting the conversation about Zoom puts:
@Joshuke @Iloveyou @choebro @Days20

So with Covid-19 starting to show signs that the end may be in sight, a lot of those that had to go to school, work, and stay connected with people got very familiar with a little company called Zoom. Now that life is returning to normal, kids are going back to in person school, and businesses have figured out more developed ways of working remotely; will Zoom have life ahead of the return to a “normal” everyday life? And will their stock survive this change?

THIS IS NOT A SHORT TERM PLAY OF ME SAYING GO BUY PUTS RIGHT THIS SECOND THIS COULD BE A LONG TERM PLAY WHERE IF YOU WANNA PLAY PUTS YOU ARE BUYING LEAPS (OPTIONS THAT EXPIRE IN 6 MONTHS+

Lets take a quick gander at where Zoom is sitting from their most recent 2021 annual report where KPMG audited their books and talk about a few basic accounting measures:


Dang this guy is talking about shorting a stock with a quick ratio of 1.56.
A P/E that is currently around 79.98.
A company that increased revenues from ~600m to ~2.6b in a single year and this guy wants to buy puts on it. Someone dunce this man and his friends.
So lets talk about the year ending 2021 since that is technically when they made most of their money (I know march last year feels like forever ago and thats cause it was).
Now out of that 2.6b Zoom had a gross profit around 1.8b after all the C-suites and executives got their cut for how well the company did (commonly referred to as Cost of Revenue)
That increase of revenue from 2020 to 2019 was around a 425% increase in revenue. But it didn’t come without growing pains

Zoom had one settlement of $85m for the whole Zoombombing fiasco. This is probably one of those types of things you don’t want happening on like your first big year of bringing in the big bucks and basically having society forced into your product. Long term no one wants to be apart of hack of infosec issue and it tends to cost companies a good amount of goodwill in the future.
Now what I can say is with the crazy increase for Zoom in revenues their net income also increased extremely well… Like 30x’s better in 2020 than 2019.

Here is Zoom’s P/E ratio trend:


Now Google’s P/E ratio trend:

And the last competitor, Microsoft P/E ratio trend:

You’re probably thinking, “wow wtf ZOOM had a crazy P/E ratio awhile ago and it just kept going down wtf does that mean Stonk guy?”
Mainly a lot of nothing besides the fact that Zoom went from being a $50 stock to being a an ATH of around $589. So of course P/e is gonna get lower as the stock price catches up with however much they are earning (which it looks like they were negative for 2017 and 2018 and broke even in 2019)
But the Price to Earning chart does show how when a company isn’t making a lot and is trading at certain levels it can be incredibly confusing… Lets just show you TSLA for the fuck of it:

Even TESLA has a reasonable chart compared to ZOOM’s P/E trend in the early days. and considering
Zoom raked in a cool 25m the year before Covid it doesn’t leave me with the idea that this company is going places and their product is so good that its going to disrupt markets.

Lets talk about what they actually list for their products actually this part is great:
Zoom Meetings: Provide HD video, Voice, Chat and content sharing across multiple devices (laptops, phones, etc)
Zoom Phone: An enterprise cloud phone system that provides powerful private branch exchange features, such as secure call routing, call queuing, call detail reports, call recording, call quality monitoring, voicemail, and “much more”
Zoom Chat: It’s included in the Zoom client and I never touched the damn thing. It’s AOL messaging for the soon to be Zoomers.
Zoom Rooms: Where you get locked in a virtual hell hole where you have to try and brainstorm with Sherry from accounting about how to fix this fucking company.
Zoom Conference Room Connector: Basically for whatever reason if you bought a Poly or Cisco conference room system and for some stupid fucking reason wanted to use Zoom on it instead than thats a possibility!
Zoom video webinars: Now this is somewhat legitimate use case that I foresee having some staying power for external facing types of presentations.
Now the recent two they just announced this year are OnZoom and Zoom Apps so lets dig into that and see if its somehow going to take market share from Google and Microsoft…


Now the OnZoom product essentially is like paying to sit at home and go to an event that you can pay for but a lot are free as well:

Now I can see some validity to the use case of this if people wanna put information and talks behind a paywall. But if you’re one of the few people that hasn’t figured out how the internet works and that literally everything you could ever need to learn is out there than yeah this may interest you.

Zoom Apps, the landing page just well… makes me laugh:


The apps they used as the headline of this page included Kahoot! and a couple note taking apps, followed by Lucid Spark (Which I’ve used its like a funky whiteboard app that you can collaborate on with sticky notes and a bunch of other very Silicon valley like functionality).
But my main point if for any reason one of the big product develppments of your company has anything to do with Kahoot! then there needs to be some serious pivoting…

Lets check to see what Zoom insiders think of the company as well:


They selling their stock! The CEO has sold shares in 2021 15 times. He’s probably largely paid in stock but my god the one buy they had on the damn chart was an award for 80 shares which definitely ain’t a buyback.

I wonder why their selling a lot of their stocks? Surely earnings must be growing right?


The general consensus is for Zoom’s EPS to be at around 1.09 for Q3.

Now lets talk about one thing that is very important is how Zoom gets paid. 50% of their revenues are generated from subscription contracts with companies. Interestingly enough we saw a weird drop in their average contract length in Q1 this year


It could almost be said that when we got to around Q1 when things started to open back up and vaccines had begun hitting the veins we saw a drastic reduction in contract length by almost 30%. Thats a little wild for a company where most of their revenues come from these contracts. That would also imply that most of the companies that got locked into their Zoom contacts from when Covid started in March are already done with that contract. They may have resigned who knows, but as more of these contracts end so does the possibility of lost customers as the world transitions back to regular life where video conferencing like Zoom is no longer needed persay.
Noting the shift of revenue mix being more leaning recently towards the annual+ customers could also show that maybe some of the returning companies are having a tough time deciding whether they want to lock in Zoom as their service provider for the virtual workplace.
I tried to find some user number increases for their platform as a whole and this was the only slide that even mentioned their customer base numbers (and it doesn’t call out the change in those numbers at all its just vague)

This would leave me to believe that if you’re doing your annual report for Analyst Day you may wanna have a slide on what your customer retention numbers are? Nope didn’t get a single slide on it…

Well you’ve made it this far you must like personal punishment,
Here’s some TA to help your smooth brain:


Of note here is the 08/31 date when the Five9 deal was terminated after hours on 8/30 the stock fell from around 350 to 300. This is where we find Zoom now. The Five9 deal also led to them deciding they were going to develop the new VEC product that was essentially supposed to be what Five9 was going to fill the spot in the company for. The deal — based on Zoom’s price of $362 a share — was worth $14.7 billion. Since then, Zoom stock has fallen 28% — costing Five9 shareholders $4.1 billion were the deal to have gone through (from a news article on Oct 1st) So the prospect of Five9 was also a way of Zoom pivoting and finding a new market, which a vote by Five9 voted against.Since then we can see an almost wonderous quadruple top set up on the daily chart. The first touch sent the stock to around 250 and the recent 2 were wicks but I’ll count it since it shows clear resistance of around the 290 level. Friday we the stock slid most of the day. We can see that typically Zoom has almost consistently droppe dinto earning after reaching its ATH:

I think this move Friday was confirming the downtrend that Zoom is currently on and that if the stock drops the 200 level we may not know how much further it could go…
Depending on how next week plays out I’d love to see some confirmation of a continuing downtrend and then I might grab some puts looking forward to what everyone else has to say on this as well!

[event start=“2021-11-22 21:00” status=“public” name=“Zoom Earnings” end=“2021-11-23 00:44” allowedGroups=“trust_level_0”]
[/event]

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Zoom is a bust can’t wait for the knife. Teams is better. Will have to read this in the am and will also post anything I find!!

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Jesus brother you were not kidding when you said you were going to do a very in depth DD lol. Fantastic stuff. This is going to be a great thread for anyone to compile any information adding to the bear case presented ( which I strongly am leaning towards and plan on playing) and also an objective/subjective bull case for zoom if anyone has any. I see no end in this downtrend and when zoom knifes, it knifes hard and could potentially blow through support levels ( looking at you PTON) and really come crashing down. I cant foresee any good guidance that can save this sinking ship when comparing it towards its main competitors like microsoft and google, and are more established as a whole and growing in their video conferencing sector while continuously taking away marketshare from zoom. Zoom was able to capitalize on uncertain times and economic uncertainty and exploded as a result, and those unique situations and catalysts that presented themselves during zooms inception that enabled it to be propelled to the heights it was able to reach at ATH are no longer presented and wont/cant be replicated again in the foreseeable future. Zoom will become the next Skype and fade away into obscurity while other videoconferencing software’s and apps that have been birthed from established tech companies that don’t put all their eggs in one basket (video conferencing) become more popular and mainstream are incorporated into many facets of our personal and professional lives. Plan on adding more as this play continue to develops adding towards a bear or bull case for a potential banger of a play.

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Seriously meaty DD on a seriously faaaat target!
Looking forward to play this soon.
Much appreciated, @Navi !


News going around today (this copy via Ortex):


What I see in the chart:

Bear trend still has room to move further downward.
IF you’re looking for descending triangle, you’ll probably find the end of it at -$200.00.
Rather, this is clearly a parallel move guiding the price to its real value.

  • Regression Trend / Trend Channel is still around the middle low portion, lots of space to that bottom mark of 185.
  • Fib Retracement clearly shows room to move further down, 238 to even under 100.
  • Fib Time Zone 5 still has until Jan 28, 2022.
  • Price Volume Trend is clearly decreasing with no obvious spikes.
  • MACD shows weakening buying pressure.
  • RSI has gone back down to the lower band.
  • Pre-Covid-Pandemic High Price was $107.34, on June 20, 2019.

Insider Transaction History per Fintel:
Also confirms the News of Sale from Ortex.


Barchart Options Chains, Monthlies:
Nov 19

Dec 17

And finally, Barchart’s own Ai Opinion:

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Wow this is incredibly informative, looking forward to watching how this plays out, thank you for taking the time to put this together

Sweet additions! You may need to do an educational post on Barchart thats a new one for me

Dude this is awesome. Thanks for the information!

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Agreed.
This will go down, but timing unknown
Pfizer also hit them hard

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Thanks for the DD, I’m def interested in this play!

Let me put my anecdotal info here though. My job renewed our Zoom licenses again earlier this year, it’s one of several video conferencing software’s that we use. I think it’s a shit product but let’s not downplay the fact that WFH is here to stay and zoom will still be a product in many companies SaaS portfolios as the pandemic ends due to remote work, even if there are better products/ cheaper products out there. Most if not all of my external calls is through zoom.

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Keep in mind that this was not really intended to be an earnings play, but could be played on the run up to earnings depending on how it is trending imo. I still have my original position in zoom that I took a few days ago, 200p 12/03 and 130p 6/22. Up 17% total right now and I plan on selling before earnings, if not today and possibly re entering again with same or similar strikes. Looks like $254.80 resistance it bounced off nice and if it can break that downwards, looking at $253.69 for next break.

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I just found an article on the verge

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Awesome DD - Teams being baked into O365 solutions makes it an easier sell, as well, it’s just a better product. Having performed Zoom and other software implementations for my clients, I feel the initial appeal has been slowly dying over time since the capitalization during covid.

Looking for a position in Puts for about 6-9 months out.

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Fantastic research. Thinking there might be some continued downward movement as this gets closer to earnings.

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Teams is taking over zoom day by day!

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Lets track Europe. If more lockdowns comes it can give zoom a bump

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I have been looking into this and it looks like teams is taking over with all there new integrations!

Just throwing in here, zoom pushes its clients and schools to take advantage of government funding through CARES act. Smart play to bring more business to them and have it funded by the government. I’m bear long term based on the DDs above and all that I have read through.

In my own space, we hire people to help underwrite grant applications for government funding to help encompass services. This could be done for a number of business not just Zoom.

As requested, I am putting up my EW Analysis on ZM which also supports this DD.

Friday Analysis: ZM pullback today is interesting and looking at it could actually indicate a lower low than I marked before for the first wave of the correction. The reason being, wave 2 as marked did not move far enough to be considered complete.

That would suggest that the current movement is wave 2 of wave 5 of wave 5 of wave A and it could go as high as 273.68 (but at least 262.79) and stay within the most probable range. If that is the case, it is likely the end of the full impulse for wave A would be in the 195 range or slightly lower.

If this is really wave 4 as marked, it should start back down when price gets just under 253 and the target would likely need to be raised to around 232. 219 would make wave 3 the shortest which is not allowed. If I had to guess I would lean towards the case where this is wave 2 currently.

Update after this morning’s price action: Now that wave 2 in progress has likely been confirmed, I think this is the probable path for ZM going forward on the current part of the correction.

-Silus

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Thanks for the confirmation bias on the TA. Also throwing in additional DP here that my company and SO’s company use teams instead of Zoom. We do use Zoom for larger parties (e.g. company wide), but that is once in a blue moon. Both our companies employ over 100K employees

Google trends also shows waning of Zoom vs Teams with Teams having dominance in the US.

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We get Cisco earnings today as well I believe

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