Day: November 26, 2024

(Bloomberg) — Zoom Video Communications Inc. gave a sales forecast for the current quarter that failed to impress investors who were expecting a bigger boost from the company’s expanded suite of products.

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Revenue will be about $1.18 billion in the period ending in January, Zoom said Monday in a statement. Profit, excluding some items, will be $1.29 to $1.30 a share. Analysts, on average, projected adjusted earnings of $1.28 a share on sales of $1.17 billion, according to data compiled by Bloomberg.

The shares declined about 4.5% in extended trading after closing at $89.03 in New York. While Zoom’s outlook met estimates, the stock had gained about 48% since the company’s last earnings report in August on optimism about the new products.

The software maker known for videoconferencing has expanded its suite of tools to offer phone systems, a contact center application and artificial intelligence assistants. In October, Zoom named former Microsoft Corp. executive Michelle Chang as chief financial officer to replace Kelly Steckelberg, who left to join design startup Canva Inc.

Zoom has seen a 59% increase in monthly active users of its AI assistant since the prior quarter, the company said in a presentation to supplement its earnings statement. It also topped 1,250 customers of its contact center application.

While there were “no major issues” with the results, a steep gain for the shares headed into Monday’s earnings means the results may not attract new investors, wrote Tyler Radke, an analyst at Citigroup.

Separately, the company announced it has dropped “video” from its official name and would now be known as Zoom Communications Inc. “Our new name more accurately reflects our expanding scope and plans for long-term growth,” Chief Executive Officer Eric Yuan wrote in a post announcing the change.

In the fiscal third quarter, sales increased 3.6% to $1.18 billion, compared with analysts’ average estimate of $1.16 billion, according to data compiled by Bloomberg. Profit, excluding some items, was $1.38 a share in the period ended Oct. 31.

Enterprise revenue increased 5.8% to $699 million. Zoom said it had 3,995 customers who contributed more than $100,000 over the past year.

An ongoing loss of consumers and small businesses from Zoom has concerned investors, particularly since these customers are typically higher-margin than corporate clients. Average monthly churn in this segment was 2.7% in the quarter, which was better than analysts’ estimates. Sales in the segment was little changed at $479 million. That was Zoom’s lowest-ever online churn, Chang said, according to remarks prepared for the company’s earnings conference call.

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The average investor can find compelling investment ideas by looking at what the big boys are doing. Regulations require larger asset managers to disclose their holdings every quarter, which can provide valuable insights into potential stocks to buy.

One closely watched hedge fund manager is Bill Ackman, who has made a name for himself by making concentrated bets as the head of Pershing Square Capital Management. There’s one business in particular that makes up a huge weighting in the fund.

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As of Sept. 30, Ackman had 15% of its portfolio’s assets (via a combination of two classes of shares) in one magnificent stock. Does this mean it’s time for you to buy?

In early 2023, Ackman and Pershing Square first started buying stock in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). The fund initiated a position when the tech giant’s shares fell to an attractive valuation of a forward price-to-earnings (P/E) ratio of around 16. This was a historically cheap price to pay for what Ackman thinks is a world-class enterprise.

He highlighted several reasons for why making this investment was a no-brainer opportunity.

Alphabet benefits from the growth of digital advertising, with its dominant presence in the market. The company’s industry-leading Google Search has unrivaled market share. And with YouTube, Alphabet has another avenue to sell digital advertising. Ackman thinks more money will move over from areas like TV and print ads to the company’s advantage.

Cloud computing is another area that will drive growth for Alphabet. As businesses of all sizes see the need for greater off-premises IT capabilities, Google Cloud has another secular trend propelling it. This segment posted 35% year-over-year revenue growth and a 17% operating margin last quarter. Ackman wouldn’t be surprised to see that margin start to approach what Amazon Web Services boasts, which is now over 38%.

Alphabet is one of the most financially sound companies on the face of the planet. As of Sept. 30, it had a net cash position of $80.9 billion. It also raked in $17.6 billion of free cash flow during the three-month period. This position allows management to aggressively buy back outstanding shares.

When it comes to artificial intelligence, very few businesses are in a better position than Alphabet. When OpenAI released ChatGPT about two years ago, the market initially was worried that it was the beginning of the end of Google Search. “We believe these concerns underestimate Google’s structural leadership position in AI for several key reasons,” Pershing Square’s June 2023 letter reads.

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A look at the day ahead in European and global markets from Kevin Buckland

And so it begins.

Trump took to his platform Truth Social late on Monday to threaten 25% tariffs on Mexico and Canada if they don’t better control their borders, and additional tariffs on China.

Asian investors still sipping their morning coffees were suddenly racing to hit the sell button, sending the Mexican peso down more than 2% on the dollar at one point and Japan’s Nikkei almost 2% lower. Automakers were standout losers. Toyota tumbled close to 3% and Nissan nearly 5%.

Most markets regained some composure by midday in Asia but pan-European STOXX 50 futures are still pointing down by about 1%, with traders wary that Europe will soon be in Trump’s cross-hairs.

The episode conjures uncomfortable memories for markets that have got used to reacting to scheduled events such as Fed policy announcements and monthly payrolls reports during Joe Biden’s tenure as president. Now, investors must brace for market-moving Trump posts at any hour, like during his first term in office.

One analyst quipped that it was time to consider downloading Trump’s Truth Social app since X, formerly known as Twitter, is no longer the incoming President’s platform of choice.

But going by Trump’s first term, social media posts and reality haven’t always matched up. There’s still some way to go before Trump takes the oath again in January, meaning sentiment towards Mexico, Canada and other tariff targets could change.

Ultimately, Trump has said many times, he’s all about making deals.

There’s little on the calendar in Europe to distract from Trump’s post, barring some central bank speakers from around the region.

Bank of England chief economist Huw Pill is due at the House of Lords to take questions on Britain’s economic health, or lack of it.

ECB board member Elizabeth McCaul speaks in Frankfurt and peer Mario Centeno presents the Bank of Portugal’s financial stability report.

Riksbank Deputy Governor Anna Seim joins a seminar in Stockholm and Bank of Finland Governor Olli Rehn answers questions in parliament.

Later in the day, the Fed releases minutes of its early November meeting when it cut rates by a quarter point, following the first, super-sized half-point cut of the current easing campaign in September.

Key developments that could influence markets on Tuesday:

– BoE’s Pill in upper house

– ECB’s McCaul and Centeno speak at separate events

– Riksbank’s Seim speaks

– Bank of Finland’s Rehn in parliament

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