Zoom Video Communications, Inc. is a communications technology company that provides a platform that enables people to connect through video, voice, chat, and content sharing. The company has an integrated product portfolio that consists of Zoom Meetings, Zoom Chat, Zoom Phone, Zoom Rooms, Zoom Video Webinars, Zoom Conference Room Connector, Zoom Developer Platform, and the Zoom App Marketplace.
Headquartered in San Jose, California, US, Zoom has grown to see its platform become a popular choice for the communication needs of large enterprises, small businesses, as well as individuals. Eric Yuan founded the company in April 2011, and it serves customers from all around the world.
Zoom has witnessed impressive growth during its relatively short history. By 2013, the company had attained 1 million users, and by 2017, it had achieved ‘unicorn’ status (a valuation of more than $1 billion). But the use of its platform exploded in 2020 when the coronavirus pandemic completely changed human living. Populations were kept indoors, and demand for remote work, online learning, and long-distance relationships saw Zoom platforms witness massive demand.
The immense success of Zoom during the pandemic at one time took the company’s market capitalisation to surpass that of oil giant ExxonMobil. However, the company has not rested on its laurels, announcing plans to launch a series of innovations across its products so as to usher in a new era of personal and business communications. Dubbed ‘Zoomtopia’, the company’s series of innovations include Hot Desking, Platform Security, Smart Rooms, Live Translation and Transcription, Phone Video Voicemails, Zoom Widgets, and tighter integrations across its products.
Zoom Video Communications, Inc. became a public company in April 2019, listing on the NASDAQ, where it trades under the ticker symbol ZM. The stock is categorised in the Technology sector, under the Software-Application industry.
Zoom Stock History
Zoom was listed with an IPO price of $36 per share, and on its first day of trading, it surged over 72%, achieving a market cap of around $16 billion at the close of business. The stock has largely been an impressive performer ever since.
After a period of stagnation for the better part of 2019, the stock picked up momentum in 2020 as the COVID-19 pandemic fuelled the demand for its products. It crossed the $200-mark in June 2020 and the $400-mark in September 2020. It continued its rally and managed to hit an all-time of circa $588 in October 2020. During that period, its market capitalisation peaked at over $140 billion. Profit-taking then triggered a market correction in 2021, and the ZM stock now trades below $300.
Zoom has never declared any dividends to its shareholders, but the company’s business model makes ZM a classic growth stock capable of rewarding investors in the form of high share prices over the long term.
How to Trade Zoom Stock
Here are the factors to consider when trading ZM stock:
- Legislative Issues
Zoom has had to deal with many legal issues in areas such as security, Zoom-bombing (intruders entering a Zoom session), data privacy, sale of confidential user information, and recording without user consent. These challenges make the company vulnerable to changes in various legislations that seek to protect consumers from cybersecurity risks and privacy violations.
Video and web conferencing has grown immensely because it saves time and travel costs, offers convenience, and is very efficient. While Zoom disrupted the market at the right time, big players have also entered the space. Zoom now has to deal with well-oiled and high-wheeled players such as Google, Cisco, Microsoft, Blue jeans by Verizon, TeamViewer, Amazon, Poly, Adobe, and IBM that have boosted their offerings of robust online meeting solutions. Competition is in areas such as pricing, integration, and deployment, contracting, product capabilities, as well as service and support. Zoom is still a relatively new company, and its success has attracted huge tech players that are well-financed and are deeply integrated within the global tech scene.
- Negative PR and Lawsuits
Zoom has already generated negative publicity due to compromising the safety and security of its users. Its platform has been vulnerable to hackers, while the company has also been criticised for misleading marketing messages that claimed its network offers end-to-end encryption. The company has also attracted class-action lawsuits that led to hefty settlement fees. Investors do not like negative media headlines, especially ones which can provide massive headwinds for the ZM stock.
- Periodic Earnings
Zoom’s fiscal year runs from February 1st to January 31st, and the company releases periodic earnings reports to update investors on its business performance. Revenues, customer numbers, and financial outlook are some of the important metrics investors watch out for in Zoom earnings reports. Positive updates will inspire higher stock prices, whereas negative updates will weigh heavily on the ZM stock.
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