Video conferencing firm Zoom Video Communications (ZM:NASDAQ) may have beaten expectations with its quarterly earnings (21 November) but investors focused on weak revenue guidance instead.

Zoom is one of those pandemic winners which has struggled as
the world has moved to a new normality. This is reflected in a current share price of a little more than $80 compared with a 2020 peak closer to $600.

Growth is drying up and this, plus a wider shift by investors out of fast growth stocks as interest rates go up, has resulted in a significant equity derating, with the shares now trading on a little more than 20 times earnings.

Revenue in the three months to 31 October was up 5% year-on-year, down from a 8% growth rate in the previous quarter and the slowest rate on record for the business.

Net income fell from $340.3 million to $48.4 million on a year-on-year basis and the company trimmed its revenue guidance for the year to 31 January 2023, blaming the stronger dollar.

Zoom has been hit both by increased competition as larger
and better-resourced rival Microsoft (MSFT) has pumped investment into its Teams platform.

The removal of Covid restrictions means many of the meetings which were happening on a screen are now occurring in person again.

Citigroup analyst Tyler Radke commented: ‘Despite some modest revenue upside, the leading indicators suggested signs of incremental deterioration.’

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