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Why zoom share price drop – why zoom share price drop:.Zoom’s Business Is Slowing Down, But Its Stock Price Is Still Exorbitant

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Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources , and more. Learn More. The pandemic sparked several new digital trends, including a ramp-up of the stay-at-home economy. Millions of jobs temporarily and possibly permanently migrated to other locations with the help of secured cloud-based technologies like Zoom Video Communications ZM The incredible uncertainty created by COVID forced employers to find a way to keep their businesses going and Zoom’s value to society extended far beyond its earnings per share.

But with the pandemic subsiding in many developed countries, more workers are heading back to the office and students back to classrooms. That has some investors rethinking the company’s valuation. In the last few weeks, the CEOs of two of the world’s biggest investment banks summoned their respective workers back to company offices, at least in part.

I’m done with it. Sharing similar views, David Solomon of Goldman Sachs expects workers to make plans for a return to the office by June 14 in the U. As employers of hundreds of thousands of workers worldwide, these banks have taken a leadership position on this issue that is notable. Over half said their top reason was the social aspect of the workplace, which is a positive sign that perhaps vaccines are giving workers more confidence.

Zoom is set to report fiscal first-quarter earnings on June 1, and the significance of this particular report is not lost on investors.

With vaccinations ramping up, analysts expect a reduction in business-related use for video platforms to start having an impact this quarter. The U. Centers for Disease Control and Prevention has issued several pieces of new guidance recently, tapering restrictions and opening the door for companies to return to their physical headquarters.

The bulls would note that Zoom Video was a growth story well before the pandemic and its financial performance suggests the virtual-meeting trend was merely accelerated — not created — by the response to COVID But more importantly, it started converting that revenue into really positive earnings. Zoom has experienced seismic shifts in its customer base over the last year, with small enterprises comprising a much larger portion of the mix.

The company had , paying customers as of Jan. While the big picture tells an exciting tale of strong growth for a highly useful technology, recent quarterly results are flashing signs of a crash in that growth rate. Data source: Company filings. It appears much of Zoom’s revenue and earnings growth were loaded up in the middle part of calendar year , corresponding with the height of the pandemic.

This valuation places Zoom well above high-growth, profitable companies like Amazon 61 times , which is highly inflated given the fact that Zoom effectively has a single product, significant competitors, and faces the real likelihood of slowing growth.

The analyst consensus, according to Yahoo! Zoom has a great business, but the triple-digit percentage growth rates of its revenue and its stock price are likely to be a thing of the past. New investors should tread carefully when considering this stock, especially at its current valuation, and keep an eye on whether paying subscribers begin to drop off as workers return to the office.

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Can it stay lofty as the workplace returns to normal? Image source: Getty Images. Fiscal Year ended Jan. Zoom Video Communications. Motley Fool Returns Market-beating stocks from our award-winning service.

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Why zoom share price drop – why zoom share price drop:


The same is true with Contact Center. But you should not take the price as reflecting anything in terms of the quality of that product. So, Zoom’s ability to attract many individual customers is also because the cost of Zoom products is lower than the prices of Webex and Teams. With the incredible growth that the remote communications industry has had, it’s safe to say that now the drive is no longer in a significant growth phase, but this growth is levelling off to an average level of growth rates.

In particular, the increase in remote work will positively impact ZM’s business. The main risk of a business like Zoom’s one, is first of all, that the platform sees a decrease in the number of customers caused both by macro trends return of people to see each other in person and by movements in the specific sector with the prevalence of other companies Webex or Teams for example.

The only way to improve profitability would be to cut OpEx and in particular to increase revenue, and Zoom will be struggling with that in We believe that it will not be easy for the company to expand and grow its business.

The company will have to either make acquisitions – something similar to what ZM’s management tried with Five9 FIVN – or make agreements to make its product more and more complete through integrations with other software and services. Therefore, we believe that the remote video communications sector is a well-established one. Consequently, it is unlikely that Zoom or any other competitor will be able to disrupt it further by introducing new products in the short term.

We made an estimate based on the characteristics of the industry, Zoom, competitors and the global situation. Specifically, the two fundamental assumptions we considered are:.

We believe there is not an adequate margin of safety to enter a long position, and overall, the stock seems appropriately valued.

For us, Zoom is a company with an interesting business but without the significant growth prospects of a few years ago. Although video conferencing was far from a new technology, Zoom became the preferred application for almost every form of workplace communication.

But in March , Zoom found itself in the right place at just the right time. When the pandemic hit the US, Zoom usage soared overnight—the software was ubiquitous for anyone working a desk job, or trying to stay connected to friends and family while social distancing. People even got married on Zoom. While virtual-work competitors like Google Google Meet and Microsoft Teams and Skype offered similar products, Zoom represented a pure-play investment opportunity for investors seeking exposure to the budding remote work revolution.

Sign up. Daily Briefing Subscribe to our newsletter to get all the news you need to start your day. Technology Sandberg’s exit may not be a big blow for Facebook-parent Meta , article with image June 2, Disrupted Safaricom’s M-Pesa, Visa offer virtual card for global transactions , article with gallery June 3, The Great Reboot Musk’s office ultimatum faces pushback in Germany , article with gallery June 2, Following an initial dip caused by supply chain disruptions, increased demand, especially in the education and business sectors, saw PC shipments return to growth.

This defies forecasts made during the initial phases of the pandemic , when analysts expected a drop of anywhere from 1. Full access to 1m statistics Incl. Single Account. View for free. Show source. Show detailed source information? Register for free Already a member? Log in. More information. Other statistics on the topic. Online Search Google: global annual revenue Software Revenue of Microsoft broken down by segment Software Microsoft Teams: number of daily active users IT Services Public cloud services market size Lionel Sujay Vailshery.

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Zoom Shares Are Down Over 44% and It Might Get Worse | The Motley Fool.Zoom signals an end to pandemic boom times, and the stock is falling – MarketWatch


Weakness in remote fitness company Peloton could also pressure the space. Pfizer plans to submit the data as part of its ongoing rolling submission to the U. Zoom Video Communications provides a communications platform that connects people through video, voice, chat, and content sharing. Click here for options trades from Benzinga. Why Carnival Shares Are Rising. Stock splits typically have led to oversized returns, says Bank of America.

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While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names. Snap Inc. The metaverse offers added opportunities for a variety of tech stocks.

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A decent dividend plus a bargain price adds up to an incredible opportunity why zoom share price drop – why zoom share price drop: investors to consider. As the world faces war, an ongoing public health crisis, and social injustice, corporate executives have found themselves facing questions from their own employees about whether or not they plan to take a stand. She was surrounded by the paps with her beau. Although big drops in the stock market can be unnerving and tug on investors’ emotions, they’re also, historically, an excellent time to put your money to work.

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More content below. Henry Khederian. In this article:. Recommended Stories. The Independent. Motley Fool. Investor’s Business Daily. Yahoo Finance.

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