people on a video call

Zoom stock slid 16% during yesterdays trading as reported quarterly earnings showed growth rates slowing. The earnings themselves were good. Zoom reported earnings of $1.36 per share, beating estimates by 20 cents. Revenue beat forecasts and surpassed $1B for the first time. Ultimately though, the growth rates have slowed since the ‘Zoom-boom’ of the pandemic.

Post pandemic

Although we are not officially out of the pandemic, many aspects of our lives is seemingly going back to normal. This also means an adjustment for business as they start to re open. Offices are welcoming more staff back around the world, and schools are opening classrooms once again. But this is causing less demand for Zoom.

Zoom stock rose 400% in 2020. Revenue was up 54% from the same quarter last year, a lot less than the 355% growth from the quarter before. This slow in growth is likely to continue. Governments look less likely to increase restrictions if the Delta variant increases with vaccine rollouts progressing well.

Zoom will lose the customers from the work place who have heavily relied on video conferencing to keep their business running. Zoom was a popular choice, although some businesses relied on Microsoft Teams as there were security concerns for using Zoom. Schools also had to use video conferencing, but there were more established companies for this market, such as Google Classroom. Even if there was competition already, Zoom did well to make a mark and become a household name and popular choice for any wanting to catch up with friends.

How can Zoom progress?

So Zoom will unlikely have the benefit of lockdowns again. Growth is slowing and the stock market is reacting to this. Is Zoom a finished company? Absolutely not. Right now, the stock price will just be correcting as there is less potential for future growth seen previously. Zoom still has an amazing, user friendly platform, and they are always looking to add new features.

I can see Zoom progressing by stepping up the competition against Microsoft and Google. They can increase security to compete with Microsoft for business clients and they can implement more features to help expand the learning environment and compete with Google. The pandemic showed businesses that they can operate remotely and allow more staff to work from home. The demand for video conferencing will be higher than it was pre-pandemic. I am sure they will be looking into this as they adjust to set up for the future.

Short term and long term

Short term I see more correction as the Zoom stock price adjusts from growth to fundamentals. Once is balance is found between buyers and sellers, we should see the stock consolidate. From here I think Zoom is a good stock for slow, steady growth in the upcoming years. Unfortunately, the share price will not continue to rise how we have seen previously. But, I do not think this is the end of growth all together.

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