Once one of the most important commodities in the post-coronavirus ecosystem, teleconferencing specialist Zoom (NASDAQ:ZM) now suffers the opposite paradigm. Ahead of its third-quarter earnings report, the company faces extraordinary competitive pressures, forcing management to adjust its product offerings. Even with this pivot, ZM stock runs headlong into relevancy concerns.
First, heading into the Q3 disclosure, the sole covering analyst for ZM stock anticipates earnings of 84 cents a share. This figure represents a year-over-year decline of 24%. To be fair, Zacks points out that Zoom has been on an “impressive” earnings streak, exceeding the consensus target in 13 consecutive quarters.
On the revenue front, Zacks estimates Zoom will generate $1.1 billion. If so, this tally would represent an improvement of 4% YOY. As with the bottom line, the company posted consistently strong sales results against expectations, beating out the consensus target in 13 of its last 14 quarters.
Still, the efforts have not translated into meaningful gains. On a year-to-date basis, ZM stock gave up over 56% of equity value.
Moving forward, Zoom faces teleconferencing platform challenges from the likes of Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Fundamentally, the ability of big tech companies to bundle teleconferencing capabilities with other software presents a more attractive offering.
To mitigate this obstacle, Zoom expanded its offerings to include email and calendar services. Still, as Axios argued, these services may be redundant.
Relevancy Problems Might Crimp ZM Stock
To be fair, Zoom also plans to launch a new initiative called Spots, a virtual coworking space. Per Axios, the platform aims to “bring the fluid interactions of in-person work to distributed, hybrid teams.” However, recent precedent suggests this concept might not bolster ZM stock meaningfully.
Meta Platforms (NASDAQ:META) already encountered significant problems attempting to recreate the office watercooler environment via the metaverse. Fundamentally, companies may find it better to simply recall their workers back to the office. That would dramatically alter the relevancies associated with ZM stock.
Long before the coronavirus pandemic, research indicated that conference calls increased miscommunication risks, a matter which video conferencing has not fully addressed. Moreover, miscommunication may cost small-to-medium-sized businesses over $26,000 for every negatively impacted worker.
Frankly, the obvious solution for hurting companies is to return the office environment to pre-pandemic norms. Mathematically, it’s not the employers absorbing costs associated with commuting to work. As well, should recessionary pressures increase, employees will likely lose their bargaining power to operate remotely.
Again, these headwinds may not directly impact Zoom’s business. However, the reduced relevancies can end up hurting ZM stock down the line.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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