EP.002: Zoom ($ZM): Growth Acceleration, A Catalyst

Hello and welcome back to Pitch The PM, where we debate high-conviction investment ideas with top PMs using our 10 Step Variant View Investment Checklist. — — — —2-2.5x Return Potential. Post the COVID stock bubble, a laser-focused management team at Zoom worked to transform from a single-product company to an Enterprise platform. Revenue growth acceleration from low single-digits to high single-digits could be the catalyst for positive earnings revisions and potentially multiple re-rating.In the second episode of Pitch the PM, ex-Citadel Analyst & Millennium Senior Portfolio Manager Doug Garber is swayed by Sean Emory’s ZM pitch. Sean has high conviction in his ZM thesis with a mid-teens weight in his portfolios. After more research, Doug also took a position.10-Step Variant View Investment Checklist[00:00] Intro[02:29] What ACTION do I want the Portfolio Manager to take? - Buy[12:06] Do I UNDERSTAND this business and industry?- Yes, Sean uses it for his business.[21:51]​ Is the stock available at a REASONABLE price today?- Yes, at 10x EV/EBITDA and at the low end of the Enterprise Software peers.[32:48] Why is this stock MISPRICED?Low growth at 3% as the Online Segment churn at 2-3%/month has reduced the overall company’s growth rate from the Enterprise Segment.[35:57] What is my VARIANT VIEW vs the street?- Growth accelerating to high single-digits from low single-digits.- Adoption of Zoom phone and Zoom Call Center and stability from the Online Segment.[38:34] What is my EVIDENCE?- AlphaSense expert calls demonstrate the uplift from Zoom Phone can be 3x for an Enterprise client.- And AlphaSense expert calls also discuss the strong, founder-led culture that is laser-focused on winning in UCaaS.[51:58] What are the CATALYSTS for the street to realize my view? - Quarterly results with accelerating Enterprise revenue growth and stable Online revenue.[55:35] What is the company WORTH if my bet is right?- $100 - $210 based on $5-$7 in FCF/share at 20-30x P/FCF.[57:38] What is the OTHER SIDE of the bet?- Competition makes it hard for Zoom to accelerate Enterprise growth and/or the Online Segment churn increases.[1:02:54] Is management ALIGNED with ownership?- Yes, this is a founder-led company with 8% insider ownership and a laser focus on being the best in UCaaS.[1:04:51] Kill Criteria [1:08:16] Short Interests [1:09:27] Variant View Checklist[1:22:25] OutroThank you for tuning in. We would be grateful for your comment or like!— — — —▶️ MORE EPISODES:BNED: 3x Return Potential Post Recaphttps://youtu.be/P6xy67DtqQ4?si=S7RyvfnPceYAmJGx— — — —Follow Pitch The PM:📩 Subscribe to our Newsletter for more high-conviction research, quarterly research updates, the research pipeline, and the job board:https://pitchthepm.beehiiv.com/subscribeYoutube:https://www.youtube.com/@PitchThePM🎧 Listen to the episodes here:https://spotifycreators-web.app.link/e/GZFTproPLQbLinkedIn:https://www.linkedin.com/in/doug-garber-42aa508/X:https://x.com/PitchThePM— — — —Avory & Company - Investing Where The World is Headed. Avory & Co runs a high-conviction growth equity strategy focusing on quality, well-led companies offering long-term sustainable growth. Sean Emory earned his degree at Yale. He was a co-founder of Blink App and founder and current CIO of Avory & Co.— — — —💡 EPISODE PARTNER: Please support our partners to keep our episodes free.This episode is powered by AlphaSense. Use our link here for Complimentary access —https://www.alpha-sense.com/Pitch/— — — —⚠️ Disclaimer: This is for educational purposes. It is not investment advice. Contact your financial advisor for suitable investments for you.