Easing pandemic restrictions and the consequent resumption of economic activities are causing some employees to return to their offices after prolonged remote working.
However, the ongoing digitalization of various industries has made business operations efficient and workers more productive over the past year. So, while enterprises may not be willing to totally return to pre-pandemic work arrangements, thereby sacrificing the benefits of remote working, many are resuming work from office for at least some percentage of their workforce as part of their long-term plans to operate through hybrid working models.
Therefore, popular work-from-home stocks Zoom Video Communications, Inc. (ZM – Get Rating), DocuSign, Inc. (DOCU – Get Rating), and Slack Technologies, Inc. (WORK – Get Rating) could retreat in the near-term because of reduced demand for their solutions. So, we think these stocks are best avoided now.
ZM provides a video-first communications platform and web conferencing services worldwide. The San Diego company offers meetings, chat, rooms and workspaces, phone systems, video webinars, marketplace, and developer platform products. It serves the education, finance, government, and healthcare industries.
Several lawsuits have been filed against ZM recently, alleging that the company made materially false and misleading statements regarding its business, operational and compliance policies. According to the plaintiffs, ZM had inadequate data privacy and security measures contrary to its assertions, and its video communications service was not end-to-end encrypted, thus placing its users at an increased risk of having their personal information accessed by unauthorized parties. These lawsuits are likely to impact ZM’s sales negatively in the coming months.
For its fiscal first quarter, ended March 31, 2021, ZM’s cost of revenue increased 155.5% year-over-year to $264.99 million. The company’s total operating expenses came in at $464.93 million for the quarter, up 131.2% from the prior-year period. As of April 30, 2021, the company had cash, cash equivalents, and restricted cash of $1.60 billion.
In terms of non-GAAP forward P/E, ZM is currently trading at 83.70x, 198.7% higher than the 26.65x industry average . And in terms of its forward EV/EBITDA, the stock is currently trading at 66.85x, which is 288.9% higher than the 17.19x industry average. ZM has lost 25% over the past nine months and closed Friday’s trading session at $372.47.
ZM’s POWR Ratings are consistent with this bleak outlook. The stock has a D grade for Value and Stability. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
We have also graded ZM for Sentiment, Momentum, Quality, and Growth. Click here to access all ZM ratings.
ZM is ranked #43 of 72 stocks in the D-rated Technology – Services industry.
San Francisco’s DOCU provides cloud-based software solutions worldwide. The company provides an e-signature solution that enables businesses to digitally prepare, sign, act on, and manage agreements. It offers its services to the mortgage, non-profit, government, real estate, insurance, technology, and healthcare industries and sells its products through direct, partner-assisted, and Web-based sales.
As part of its drive to continue connecting and automating the agreement process, DOCU introduced DocuSign Notary, its remote online notarization (RON) solution, on March 24, 2021. DocuSign Notary enables organizations to…
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