Pfizer Inc Pharmaceutical and German biotechnology company BioNTech announced on the 9th of this month that their COVID-19 vaccine could prevent 90% of COVID-19 infection in large-scale trials. As soon as the news came out, the market reacted violently, with the S & P 500 far outperforming the technology-heavy Nasdaq composite index, while ZOOM, a recognized "home beneficiary" stock in the epidemic, fell for two days in a row.

Even though there has been some correction in ZOOM's stock price recently under the vaccine good news, ZOOM is still the biggest gainer and strongest king of SaaS this year.At the closing price on Nov. 24, it has risen 528% year-to-date, with a total market capitalization of $121.6 billion, surpassing the market capitalization of software giant IBM.

FY2021 is speeding up, and steady growth in the coming year can be expected.

Q3 earnings will be released after November 30 US Eastern time, and it is almost certain that Q3's performance should be equally bright.2020 in the context of global health events, it has been a difficult year for most enterprises. Long periods of home isolation, "Work From Home" and school lectures make online communication extremely important. Many students joke that they are on "Zoom University". As a result, ZOOM's performance is running at an unpredictable pace before the epidemic in 2020.

In the first two quarters of fiscal 2021, Q1 grew 169% year-on-year and Q2 doubled year-on-year, with revenue of $664 million. Behind the astonishing growth rate is the increase in new corporate customers as a result of the epidemic, which contributed 75 per cent of revenue growth in the first half of fiscal 2021. Equally striking is the number of customers. The number of customers with more than 10 Q2 employees has reached 370000, compared with 82000 at the end of fiscal year 2020 (as of January 31, 2020).

As public health events began to spread around the world in March, and Q2 has a profound impact on the global economy, the demand for corporate digitization can be described as an "overnight outbreak". Therefore, as for the performance of Q3, it is highly unlikely that Q2 will double on the basis of Q1, but the steady growth of performance in Q3 and the following year is predictable.

SaaS industry subscription contracts are usually signed for 2-3 years. According to the disclosure of the Q2 financial report, based on the large customer base of the new expansion, the contract accumulated rapidly, and the remaining performance value (remainning performance obligation) of Q2 increased to 209% to 1.416 billion US dollars compared with the same period last year, of which 1.018 billion is expected to be fulfilled in the next 12 months, thus providing a stable support for the 12-month performance.

Focus on cloud video, Zoom Iphone or new breakthroughs

Unlike other SaaS head players, Zoom is still in the "focus" stage. The typical development path of SaaS manufacturers is to accumulate customer base and maintain high viscosity in order to accumulate customer base and maintain high stickiness. On this basis, Up-sell and Cross-sell increase ARPU value.

Compared with other large manufacturers that already have multiple product lines or whole product buckets, the current product line of Zoom appears to be a bit single, mainly around cloud video.At present, with the acceleration of the epidemic, this track is in a stage where demand breaks out and the head company enjoys excess dividends. Even if the vaccine is expected to be launched as soon as possible, the current vaccine news is mainly aimed at removing uncertainty about economic repair, rather than eliminating the negative impact of the epidemic on the economy.

As a result, the established habits of working from home, cloud video and cloud collaboration will be preserved. Giants such as Facebook Inc and Microsoft Corp have announced that some employees will be allowed to telecommute permanently after the epidemic.

Although there are many competitors in the track, on the one hand, traditional providers such as Skype for Business and Webex, 2C Internet giants such as Google and Facebook Inc have also launched similar products or upgraded related functions, and some new start-ups have also joined the competition, but at present, with the clear positioning of 2B at the beginning, Zoom insists on product first and continuous function iteration to become the leader of the track.

At the same time, Q2 launched hardware products to further expand the user portal, and launched subdivision products and industry-specific solutions around different scenarios of cloud video, so as to gain more market share in the competition more quickly.

In addition to the cloud video product line, Zoom Phone is a relatively young product of Zoom, launched in mid-2019, is a cloud phone system. The product can support inbound and outbound calls through the Public switched telephone Network (PSTN), providing customers with a convenient cloud phone communication experience.And the product can be seamlessly docked with cloud video products, so it can be easily transformed from video scene to voice scene, which also means that the difficulty and cost of user expansion of this product are relatively low.

The expansion of cloud communication products on the one hand expands the market space of ZOOM, on the other hand, as its relatively new product line shoulders the important task of proving business scalability, Zoom Iphone's business has expanded to 40 countries and regions in Q2.Q3's financial statements can focus on Zoom Iphone's relevant operating data or its contribution to revenue.

Can overvaluation logic continue?

It is clear that the share prices of many technology stocks have broken through the conventional valuation framework and logic this year. In the past, for the valuation of SaaS enterprises, the rapid development period of PS is usually about 30X level. According to Bloomberg, the current TTM PS multiple of Zoom is 89x, but thanks to rapid growth, this multiple is expected to reach 50x in the 2021 fiscal year (ending January 31, 2021).

Another logic is that interest rates are an important factor in traditional valuation logic, and most economies will be at a low interest rate now and for some time to come, which will undoubtedly push up the valuations of high-quality assets.

To put it simply, is the current valuation of ZOOM expensive from a traditional point of view? The answer is yes, but in terms of place and time, it is not outrageous indeed. Q3's performance is also relatively predictable and more surprises are expected.