Focus on 3 FTSE Communications Stocks with Over 100% 1-Year Return as Zoom’s Profit Increase

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Summary

  • Zoom Video Communications’ pre-tax profit for FY20 increased to £476 million from £11.5 million a year ago.
  • Zoom managed to reduce its income taxes globally in 2020 by as much as $300 through stock-based compensation.

 

An independent report has found that Zoom Video Communications’ pre-tax profit for FY20 increased to £476 million from £11.5 million a year ago, an increase of 4,000 per cent, but did not pay any income tax for the same.  

The company’s popularity soared during the pandemic as offices, schools and colleges functioning remotely shifted to Zoom’s video conferencing platform due to social distancing and restrictions during the lockdowns.  

 

Also read: How will Zoom maintain it’s earnings with keen competition on it’s heels? 

 

However, the report by Institute On Taxation and Economic Policy also revealed that the company’s surge in profit is not matched by a corresponding rise in taxes, mainly due to using of executive stock options as reflected in the company’s income tax reconciliation. 

 

The study has found that the company could enjoy tax benefits through research and development tax credits and accelerated depreciation.  According to the company statement, it managed to reduce its income taxes globally by $300 million through stock-based compensation in 2020. 

 

Also read: Zoom (NASDAQ: ZM) to Raise $1.5Bn in Secondary Share Sale 

 

Companies compensating leadership with stock options can write off massive expenses that are more than the actual cost for tax reasons, the report said.  

 

Also read: Zoom (NASDAQ: ZM) On an Expansion Drive, To Open R&D Centre in Singapore 

 

A look at three communications and networking stocks listed on London Stock Exchange (LSE) that have given over 100 per cent one-year return. 

 

Telit Communications Plc (LON: TCM)  

 

The machine-to-machine communications and Internet of Things company has a one-year return of 155 per cent. It has said that it expects its revenue for the year to fall by 10.4 per cent to $343.0 million from $382.8 million, which it said was symbolic of the company’s resilience in the face of a pandemic.  

 

The company has stated that revenues from the Internet of Things have remained robust and is expected to increase by 6.1 per cent to $43.5 million from $41 million a year ago, largely due to because of good performance from the platforms and connectivity businesses. The group expects its adjusted EBITDA to be between $38 million and $41 million, against $38.2 million in 2019.  

CEO Paolo Dal Pino said that the board believed in the company’s potential but also felt that it was undervalued as compared to its peers. The CEO added that the management would strive to fix it to give shareholders better value as justified by the company’s performance.  

The shares of the company were trading at GBX 210, down by 0.71 per cent on 22 March at 11:34 GMT+1. The FTSE AIM 100 Index was up 0.16 per cent at 5,903.07. 

Batm Advanced Communications Ltd (LON: BVC)  

 

The FTSE All-Share company engaged in the business of marketing data and telecom products has given a one-year return of 138.32 per cent.  

The company’s revenue for FY20 was up 49 per cent to $183.6 million from $123.4 million, and its EBITDA increased 100 per cent to $19.7 million from $9.8 million a year ago.  

For 2021, the company expects revenue growth to continue, and the board also expects to achieve better results in gross margin.  The shares of the company were trading at GBX 97.80, down by 1.01 per cent on 22 March at 11:59 GMT+1. The FTSE All-Share Index was up by 0.22 per cent at 3,834.56. 

 

MTI Wireless Edge Ltd (LON: MWE) 

 

The FTSE AIM All-Share stock has given a one-year return of 219.66 per cent. The antenna solutions company’s FY20 revenues increased to $40,893k from $40,043k. The company’s profits increased to $3,492k from $2,955k in FY19.  

CEO Moni Borovitz said that the first two months of 2021 started on a good note, and the company expects to keep up the momentum through the year. 

 

The shares of the company were trading at GBX 83, down by 4.05 per cent on 22 March at 12:12 GMT+1. The FTSE AIM All-Share index was up by 0.29 per cent at 1,201.14. 

 

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