Checking in On the Pandemic Stocks: ZM, SHOP

The article highlights a divergence in post-pandemic performance among former 'stay-at-home' darlings, Shopify and Zoom Video Communications. Shopify (SHOP) demonstrates sustained strength, reporting 31% YoY sales growth in its latest period and a positive EPS outlook of $1.07, up 16% over the last year, driven by the enduring shift to online shopping. In contrast, Zoom (ZM) shows significantly moderated growth, with sales up only 5% YoY, despite a 10% increase in adjusted EPS to $1.53 and improved cash flow, indicating a need for more robust sales expansion to regain momentum.

Analysis

The post-pandemic performance of former 'stay-at-home' stocks is showing a clear divergence, with Shopify (SHOP) demonstrating sustained fundamental strength while Zoom Video Communications (ZM) faces significant growth headwinds. Shopify's latest results highlight a 31% year-over-year sales increase, marking its tenth consecutive period of double-digit percentage growth, underscoring the durability of the e-commerce trend. This top-line momentum is supported by a positive earnings outlook, with the Zacks Consensus EPS estimate for the current fiscal year up 16% to $1.07. In contrast, Zoom's growth has sharply decelerated, with sales rising only 5% from the year-ago period. Although Zoom improved profitability, with adjusted EPS climbing 10% to $1.53 and free cash flow increasing to $508 million from $365 million, the narrative is dominated by its stagnant top-line. Despite a positive EPS forecast for the current year, the company's stock performance is viewed as being contingent on its ability to reignite meaningful sales growth.

Key Decisions for Investors

• Investors should note the clear bifurcation in fundamentals, where Shopify's sustained top-line growth presents a more compelling case than Zoom's reliance on bottom-line efficiency amidst slowing sales.
• For Shopify, the consistent 31% revenue growth and positive EPS outlook support a bullish thesis, though it remains crucial to monitor for any slowdown in the broader e-commerce sector.
• Regarding Zoom, despite favorable cash flow and an improved EPS outlook, significant caution is warranted until the company demonstrates a clear path to re-accelerating revenue, making the next quarterly report a critical catalyst to watch.