Why did zoom stock fall today – none: –
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Trade prices are not sourced from all markets. Previous Close Volume 5,, Market Cap Press Releases. SEC Filings. In the first months of the pandemic, businesses that abruptly found themselves with remote employees had no choice but to pay for video-conferencing software. It didn’t matter how much it cost; what mattered was getting up and running quickly. There are plenty of video-conferencing options, but many of them are geared toward larger enterprises or tied to legacy systems.
If a company was already a Cisco customer, using WebEx made sense. For many companies, though, Zoom was the obvious choice. Even though the pandemic isn’t over, the environment today is very different. Companies that absolutely needed to adopt Zoom’s software have already done so. Some of those companies are starting to bring workers back to the office. While remote work will probably be more prevalent in the post-pandemic world than in the past, plenty of workers will no longer be using Zoom as often.
Companies that frantically adopted Zoom last year can now take a breath and decide whether it’s the best solution. The urgency is gone. Zoom is starting to see smaller customers drop off the platform , and enterprise customers are taking more time to make buying decisions. The bonanza is over. Zoom expects to report lower revenue in its third quarter than it reported in its second quarter. It’s possible that Zoom’s revenue will eventually start to decline on a year-over-year basis as its customers adjust to the post-pandemic world.
The company is already seeing some of its pandemic-era growth start to unwind. Where the post-pandemic baseline for Zoom ends up settling is anyone’s guess. The all-stock deal was attractive for Five9 shareholders at the time of the offer, but not so much once Zoom’s stock tanked. It will be difficult for Zoom to make any major acquisitions using its stock as currency after the Five9 deal collapsed. The time for that was probably last year when the stock was soaring and confidence that it would keep soaring was high.
The window of opportunity for Zoom to use its inflated stock to diversify via acquisitions appears to be closed. Zoom stock is expensive based on its full-year guidance, but it’s not that expensive. That guidance represents a price-to-sales ratio of about 19 and a price-to-earnings ratio of about Expensive, yes, but not crazy for a fast-growing company.
If Zoom stops being a fast-growing company — which looks like will probably be the case at least for a while as the pandemic ends — all bets are off. Will investors be willing to pay nearly 20 times sales for a software company that isn’t growing much? While Zoom is producing hefty profits today, that may not remain the case. If large numbers of businesses are essentially forced to pay for your software, of course you’re going to be extremely profitable.
As the pandemic ends, so does the absolute necessity of Zoom. None of this is to say that Zoom is a bad company. Its product is easy to use and would have probably disrupted the video-conferencing market, even without a global pandemic. But the stock is pricing in a lot of growth, and it doesn’t look like Zoom will be able to deliver. As growth grinds to a halt and margins slump, Zoom stock could fall off another cliff as investors reevaluate the pandemic darling.
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Why did zoom stock fall today – none:.Zoom Video Communications, Inc. (ZM)
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