Zoom Video Stock Dives. Citi Says Lowered Guidance May Be ‘Too Optimistic.’

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Zoom Video Communications stock dived Tuesday as the market digested the company’s latest results.

Citigroup

said that although management reduced its financial forecasts, the new outlook might still be too rosy.

Zoom stock (ticker: ZM) dived about 16% to $81.84 in afternoon trading Tuesday, the largest intraday decline since November 2021. The stock fell the most in late 2020, when it dropped 19.6%.

Zoom on Monday projected earnings between $3.66 and $3.69 per share for the full fiscal year, lower than Wall Street’s forecast for $3.78 a share. Management had previously estimated full-year earnings up to $3.77 a share. The company also lowered its sales outlook for the full year to between $4.39 billion and $4.40 billion, falling short of Street estimates for $4.51 billion and down from a previous call of up to $4.55 billion.

The company blamed its online business, a segment focused on smaller businesses and the consumer, which saw fewer additions of new customers in the second fiscal quarter.

Zoom grew spectacularly early in the pandemic in 2020 as demand for videoconferencing boomed, but those days are now long gone. Sales rose 8% to $1.1 billion for the three months ended in July compared with the year-ago period. That marks the sixth consecutive quarter that revenue growth has slowed. The growth rate in the first quarter was 12%.

Citi’s Tyler Radke, who reiterated his Sell rating in a Tuesday note, says the revised guidance “could be too optimistic after the underperformance in Q2.” His argument rests on the weakening macroeconomic environment and the fact that consumers’ buying patterns of consumers are less predictable, which could further hamper customer growth in the online segment.

Radke on Tuesday further lowered his price target to $76 from $91. He had cut his call from $99 just a week ago, when he also downgraded the stock to Sell from Neutral.

Meanwhile, Ryan Koontz of Needham remains on the sidelines. He maintained his Hold rating on Tuesday sa,ying he is waiting to see online sales stabilize and for new products to bring in a significant contribution to revenue. Zoom recently unveiled a product called Zoom Contact Center, which helps clients route calls to the right support agent.

To be sure, there are bulls in the arena. Benchmark’s Matthew Harrigan reiterated his Buy rating on the stock after the results, saying he sees sales accelerating from new products like the Zoom Contact Center in the long-term.

Out of the 33 analysts tracking the stock, about 36% are bullish, while roughly 61% rate it as Hold. Citi is the only firm that rates the company at Sell.

Write to Karishma Vanjani at [email protected]