What to watch for the week of 6/13/22
Get prepared to take on the market by checking out my watchlist. Here’s what I’m most interested in for the week beginning June 13th. These are just a few of the potential market catalysts to look out for in the coming days. Feel free to save this post for reference, share it on your social page (please @ me if you do) and follow me for more. Let me know what you’ll be watching in the market this week in the comment section. Good luck everyone!

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Luka 🦉's avatar
$97.1m follower assets
Cisco System 💸 $0.38/share
Maybe $CSCO is not the hottest tech company out there, but it's a profitable business, with a strong dividend track record (10y dividend increase). I am a happy shareholder 😊
Yield 3.35%
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Cisco Systems, Inc. $CSCO
1. Is the company undervalued?
EV/EBIT: 12.64
EV/Sales: 3.48
Price/Book: 4.69

Cisco is a high-quality business, which trades at a large discount to the market. The company has historically grown at a moderate pace and returns a significant amount of capital back to
shareholders. Notwithstanding $CSCO is facing supply chain and inflationary challenges, which has analysts worried that growth will be non-existent for the foreseeable future. Nevertheless, investors could party like it’s 1999 if the situation changes from bad to not so bad.

Link to full write-up here:
StockOpine's avatar
$31m follower assets
What is the bull and bear case for Zoom Video Communications $ZM?
Bull case:

  • Valuation appears reasonable with the stock trading at pre pandemic levels even though $ZM managed to increase sales by 558% from FY’2020 to FY’2022. EV/EBITDA is c. 18x and EV/Sales is 5.3.

  • Net dollar expansion rate of enterprise customers per latest quarter was 130%, which shows that large customers are spending more with Zoom every year.

  • The Company is highly profitable with operating margin and free cash flow margin for FY’2022 of 26% and 36% respectively.

  • Leader in meeting solutions and UCaaS (Gartner Magic Quadrant). Top ratings in G2 reviews and leader in G2 Grid for UCaaS and video conferencing.

  • Hybrid/work from home is here to stay.

  • Management executed very well during the pandemic scaling the company and coping with demand as well as dealing with security issues which arose at the start of the pandemic.

  • Organic growth and continuous development of products as well as entrance into new markets in the last years is a sign that management is delivering (Zoom phone, contact center, zoom rooms, zoom events).

  • Managed to build a brand and stand out as leader despite the fierce competition from giants like Microsoft, Google, Cisco.

  • Founder leading the business with skin in the game.

  • Video conferencing allowed the company to land into large number of enterprise customers. The opportunity now is to expand within those customers and cross sell additional products (zoom phone, zoom rooms, etc.). Expanding within a customer increases switching cost.

  • Company has plenty of financial resources with $5.4B of cash and marketable securities and no debt on its balance sheet.

What are the main risks for Zoom?

  • Intense Competition in the space. Competitors with more financial resources ($MSFT, $GOOG, $CSCO).

  • As of Q4, 33% of revenue was from customers with less than 10 employees. Potentially, those customers could churn over time as employees return back to office.

  • Video conferencing might be seen as a complementary product like Microsoft Teams with Office 365, thus Zoom could lose customers to competitors. For the time being this does not seem to be the case as Zoom has continuously been adding new enterprise customers.

We will monitor those risks and we look forward to tomorrow’s earnings release.
New Lows Today @ 10am
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