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: After just one day of trading, Zoom Video is the most highly valued tech stock by this metric

Zoom Video Communications Inc. shares skyrocketed to rare heights Thursday after the videoconferencing company launched its initial public offering, potentially giving Zoom the highest valuation relative to its sales on Wall Street. Read More...

Zoom Video Communications Inc. shares skyrocketed to rare heights Thursday after the videoconferencing company launched its initial public offering, giving Zoom the highest tech company valuation relative to its sales on Wall Street.

Zoom Video ZM, +72.22%  shares surged more than 80% to an intraday high of $66 and closed up 72% at $62 in their trading debut Thursday on the Nasdaq, after the company priced 20.9 million IPO shares at $36 Wednesday evening. The company filed for its IPO in late March, and had raised its expected pricing to a range of $33 to $35 a share on Tuesday, up from a previously expected range of $28 to $32 a share. Underwriters have the option of an additional 3.1 million shares to cover overallotments.

Zoom earned the distinction of one of the few unicorns to touch profitability before IPO — the company broke even for it most recent fiscal year after revenue more than doubled to $330.5 million, with an adjusted profit of 3 cents a share — and now becomes one of the most highly valued companies on the public markets.

Read: Zoom Video IPO: 5 things to know about the videoconferencing company

At Thursday’s close of $66, Zoom commands a market cap of $14.4 billion, a staggering total especially when one considers the company was valued at about $1 billion back in January 2017, according to The Wall Street Journal. That gives Zoom an enterprise value of more than 49 times its annual revenue, the highest EV/sales ratio of a U.S. tech company valued at more than $500 million, according to FactSet data, and it isn’t a close race. Before Zoom, the most highly valued tech company was Zscaler Inc. ZS, +0.48% which has a valuation ratio of 30 times its annual sales. It took Zscaler a little more than a year to double its stock price from its early 2018 IPO.

When asked about that high ratio, Eric Yuan, Zoom’s president, chief executive and chairman told MarketWatch in an interview that he is not bothered by the high valuation ratio. Yuan holds a 21.1% stake in the company, which would be worth about $3.6 billion at the top share price commanded Thursday.

“Yes, I am comfortable [with the valuation] because we focus on the market share to get more customers to switch to our platform,” Yuan said in a phone interview from New York.

Other highly valued software companies pale in comparison. Okta Inc. OKTA, -0.28% , Atlassian Corp. TEAM, -8.32% Twilio Inc. TWLO, -0.77%  and the most recent tech company to IPO, PagerDuty Inc. PD, -2.12% are in the 23-to-25 range, according to FactSet data. Zoom appears likely to outperform PagerDuty’s impressive 60% jump in its first day of trading last week.

In its S-1, Zoom cited estimates that the videoconferencing market could reach $43.1 billion in 2022. Yuan said its approach to reliable videoconfencing will grow that market into new areas like health care on a global basis.

“Like a patient in Africa or Asia, before they go through a surgery, they can call the best doctor here and to get a second opinion,” Yuan said. “I think videoconferencing opens up brand-new use cases.”

Zoom Video competes with legacy web-based meeting providers like Cisco Systems Inc.’s CSCO, +0.16%  WebEx and Microsoft Corp.’s MSFT, +1.31%  Skype, bundled service providers that offer videoconferences like Alphabet Inc.’s GOOG, +0.00% GOOGL, +0.11%  Google, and point solutions providers like LogMeIn Inc. LOGM, +1.01%

The fervor surrounding Zoom Video has had a mistaken-identity effect with the now-former-penny-stock of a company called Zoom Technologies Inc. ZOOM, +10.20% which saw its stock soar 56,000% in the past 30 days.

On the year, the Renaissance IPO ETF IPO, -0.89%  has rallied 29% on the year, while the S&P 500 index SPX, +0.16%  has climbed nearly 16% and the tech-heavy Nasdaq Composite Index COMP, +0.02%  has gained 20%.

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