The coronavirus crisis has caused panicked investors to look everywhere for shelter, including extremely expensive stocks such as Zoom Video Communications, Inc. (ticker: ZM). But while there has been a surge in usage of the service, the stock could plummet as investors seek out companies with steady cash flow in months ahead. That’s according to IPO Edge Editor-in-Chief John Jannarone, who spoke to TD Ameritrade in an interview available here.
Jannarone pointed out that Zoom trades at an eye-watering multiple of 50 times this year’s expected sales, according to Sentieo, an AI-enabled research platform. And while the company is set to eke out positive Ebitda this year, its margins are likely to remain compressed as it faces intense competition from deep-pocketed rivals such as Microsoft Corporation and Cisco Systems, Inc.
Jannarone said investors might keep an eye on online pet-supply retailer Chewy, Inc., which is set to report earnings Thursday. While the stock isn’t cheap at about 2.5 times this year’s sales, it has a very sticky customer base that’s likely to continue using the product well after the coronavirus crisis ends.
IPO Edge Contact:
John Jannarone, Editor-in-Chief