Zoom Video Communications Inc. jumps after “outperform” rating at CICC. But should you buy it?

on Feb 15, 2022
  • Zoom traded up more than 3% in premarket on Tuesday after an "outperform" rating by CICC.
  • The stock has fallen from a high of above $585 in mid-October.
  • Investors keep an eye on the earnings call on February 28 amid waning post-pandemic gains.

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Zoom Video Communications Inc. (NASDAQ:ZM) traded at around $146 on Tuesday in premarket, with the price up from a low of around $141 the previous day. The gains happened after the video communications company received an outperform rating at CICC, with a price target of $182.92.

The gains erased some losses, although marginal, after the stock’s losing streak since October last year. Declining post-pandemic boosts are believed to be behind the recent decline, with the third quarter of 2022 revenue up 35%, compared to 54% in the second quarter. But should you buy stock?

Under pressure Zoom finding support at $140

Source – TradingView

From a technical point of view, Zoom is under pressure despite the bullish sentiment that developed following an outperform rating. The stock remains on a bearish trendline, with the 50-day moving average and the 100-day moving average above the price. The stock is finding support at $140, although it is not clear if it will maintain the current rebound given that investors remain cautious ahead of the fourth quarter of 2022 earnings.

What lies ahead?

Zoom releases its financial results for the fourth quarter of 2022 on February 28. During its third-quarter earnings call, the company projected adjusted earnings per share of $1.06 to $1.07, below $1.11 per share in the third quarter but higher than analysts’ estimates of $1.05. With the current drop in Zoom stock price, investors seem to have priced to the projection.

However, they will be keen on additional announcements by the company on how it rides the post-pandemic tides. Optimism-building announcements/guidance and earnings that meet or surpass estimates could boost the stock, with the next potential target at around $180. Conversely, a disappointing outlook could see the stock drop below $140 to $111.