Kohl’s beats, Zoom soars, Target beats on digital sales spike

Target sales rose due to digital sales and successful holiday season. Zoom shares jump after earnings beat, as Kohl’s points to stronger growth in the year ahead. Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi breakdown the numbers.

Video Transcript

JULIE HYMAN: Well, we start with what's going on with earnings. And specifically, let's take a look at Zoom. The company's shares have come down from their highs over the last few months. However, they are higher this morning, revenue up to $882.5 million. And you know, there had been some concern about Zoom's momentum slowing down. But this is the third straight quarter of growth over 300% if you're looking at year over year growth to revenue.

And as we start to sort of lap the pandemic effects, that will provide even more of a test for the company. But the company did guide for growth for its fiscal year ending in January 2022, up 52% to 43%. That is ahead of what analysts had been looking for. So Myles, it seems like they seem to be addressing some of these concerns, that it was just a pandemic play, for example.

MYLES UDLAND: Yeah, and I think it was interesting on the call to hear management talk a little bit about the thought behind that guidance, which was kind of here's how we see the landscape now. And there were a couple of questions in the direction of if trends go back to normal, or we start to get back to something like normal life, how would you react to that?

And at least as far as I read it, management said, well, I guess we'll figure that out if and when that happens. But I think it's just an amazing business story to see a company grow revenue at the size Zoom already was. To be clear, this was not a penny stock before the pandemic began. The stock had an incredible run in 2019 when there was no COVID-19 pandemic, at least not one that we knew about yet.

And so the stock has certainly had just an amazing run, up almost 400%, revenue up almost 400% over the totality of its fiscal year 2020. But at the same time, when you see a performance like this from a name with such a specific event pegged to it, this flattish and really off 20% from its highs performance that we've seen from the stock going on almost six months now, I'm not sure that it really concerns management per se.

They are sitting on a lot of cash. They were asked a couple of questions on the call about what they would do with that cash. And the answer is, we're still figuring that out. They actually asked one analyst if you have any ideas, I guess, let us know. But it is, Sozzi, as we've talked about a couple of times, a corporate story that sort of went from 0 to 100 million thousand bajillian overnight.

And I think Zoom is probably still trying to find its legs as a company that's now on track to bring in almost $4 billion in revenue next year, a trajectory I don't think they were planning on for probably many, many years, you know, when you go back in time just 18 months.

BRIAN SOZZI: Well, what you mentioned about cash, I think that's one of two stories investors need to watch on Zoom this year. They ended the quarter with $4.2 billion in cash. And they, to your point, yes, they were asked about it. And they said they were spending a lot of money on data centers. But you're not going to spend $4.2 billion on building out data centers all over the world.

You'll spend a large chunk of it, sure, but I think all eyes will now turn on how that cash will be spent. Do they go buy other companies to further build out that platform? That is not yet determined. Do they go into the storage market, data storage market? That has not been yet determined. And the other thing I would watch out here for is that Zoom is no longer, I think, just a video first platform.

It's what we've come to know it for. It's why the stock has gone through the roof. But now they're really thinking about building a whole platform. And they are now testing digital events, digital events and corporate digital events function on the platform. And they want this to be your go to destination for all things chat, video, et cetera.

Now I'm sure the folks at Microsoft will have something to say about that. But nonetheless, Zoom right now is thinking beyond just the core video business. Also Zoom phones, their Zoom phone business is finally, I think, starting to reach the point where analysts are going to get excited about it and start building into their estimates.

JULIE HYMAN: Well, we're going to speak all about this with the CFO, Kelly Steckelberg, in just a few moments. I well remember back in April 2019 when the company became public and we spoke to the CEO Eric Yuan at that point. Remember, it was profitable when it came public, which is relatively rare these days.

I just want to mention some other companies that we're watching this morning. Target is one of those. Target store comparable sales up 6.9%, digital comps more than doubling. Both of those were a deceleration, however, still relatively strong and the company's earnings per share coming in above estimates as well I know you're watching that, Brian Sozzi, as well as what's going on with Kohl's this morning.

BRIAN SOZZI: Yeah, whether Target shares pop, and we're not seeing much of a movement pre-market. I think what you saw in the fourth quarter, this was priced in six months ago. What is important today if you own shares in Target is two things. One, their investor day is today, very important event for them each and every year. I think they're going to come out and guide to how many stores they're going to open this year. Last year they opened 30.

I wouldn't be surprised if they cranked that up just a little bit, given the momentum they do have in their business. I would also be on the look out for whether Chairman and CEO Brian Cornell comments on quarter to date sales.

We've been seeing retailers come out over the past week and a half and saying, you know what? The first quarter has started off pretty well. I wouldn't be surprised if he offers similar comments. And that might even spark the stock perhaps a little bit further, but again, to be determined.

JULIE HYMAN: And really quickly talk to us about Kohl's too. I know you just got off the phone with the activist that's targeted the company.

BRIAN SOZZI: Yeah, so Kohl's out with earnings. And suffice it to say, yes, I just got off the phone with Macellum Capital's Jonathan Duskin. And he is leading the activist group that came out last week and is fully on attack here on Kohl's. Let's just say he's not exactly pleased with this quarter and what they had to say. We will leave it at that.

But Kohl's certainly has a different perspective on their quarter. Their comps person, Julia Fennelly, sent over some notes this morning, noting that they're extremely confident in their outlook, even though sales fell 10% and the stock's down about 17% over the past two years.

They have a lot of proving to do. And I don't think the activist is pleased here with the reinstatement of the dividend. It's not going to cut it, $200 million to $300 million stock buyback, not pleased there as well. I would expect them to drop a pretty epic presentation on Kohl's very, very soon. And he has not talked.

JULIE HYMAN: Looking forward to that.

BRIAN SOZZI: I would also add this too. They have not talked. These two sides have not talked since the campaign was announced last week.

JULIE HYMAN: Yeah, and that is interesting and maybe a little bit unusual compared with recent activist campaigns elsewhere.