Is Zoom Video (NASDAQ: ZM) Starting To Bottom Out? – Zoom Stock Falls On Growth Concerns

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Zoom stock has lost over 25% since the deal was announced, but prices gained Shares of video communication platform Zoom went spiralling down 12% in. Down Massively, Zoom Stock Is Poised to Be a Long-Term Winner. Motley Fool Zoom stock goes full circle, hovers at pre-pandemic levels. Yahoo Finance.
 
 

 

– Why zoom stock going down – why zoom stock going down:

 

Connor Allen: Yeah. For me, when a stock falls a lot, as an analyst, I put more work than most people would do into each company that I own. I know my thesis of why I own it. I know a lot about the company and it’s almost like you have a relationship with the company. You’re like, I love this company, this is the future and this is why I’m investing in it. It’s a little bit easier for me to see a 20 percent drop in a stock that I really like, and I’m just like, I’m not going to touch it, is my thesis still intact?

If so, I’m still owning this company. But it hurts me when my thesis actually is broken from something that causes a 20 percent drop.

For example, Zillow , that happened this quarter when they came out and said that they were stopping their iBuying process, I sold the company because that was proof that the optionality that I thought they had wasn’t going to work out.

I thought that was going to be a cash cow for the business. When that happened and the stock sunk 20 percent, that hurt. Jason Hall: It fell for a clear reason and a legitimate reason. The thesis for the business completely changed, just like that. Connor Allen: Yeah, I was just saying, when you look at what has happened to a lot of companies this quarter is even when they have a good earnings report and they fall percent, Upstart’s a great example for me, where I’m like, I’m buying this.

There is times to buy the dip and there are times to sell on the dip, and I think that’s what a lot of investors just don’t understand that every dip is not a buying opportunity. But when it is, it can be great, and for a lot of investors. Jason Hall: I think to me the key is that We should buy regularly for most people, to have a regular cadence of buying and investing and once you own it, you follow the business and the thesis and then your glacial about changing anything.

If you’re planning to add money, that makes sense. But I think for me the best practice I found is slowing everything down. Don’t do anything quickly. Because unless I know like you’re talking about, Connor, like Zoom for an example, Zoom is like the rare example where without the Fool’s disclosure guidelines, I would have bought Zoom stock today. I absolutely would because I know the business down.

I was up to AM doing a cash-flow workup of trying to value the business over the next 10 years. I had pretty legitimate reason why I was ready to act quickly because I believe in this business and I want to own more of it.

But I think in general, the best thing for most people to do it for me absolutely it’s to slow it down and almost always works out better if I just add an extra day before I do whatever I’m going to do and make sure why am I making this decision? Am I making it because the price fell, or am I making it because I think this is an incredible business that I want to own long term, and if it’s the former and not the latter, then I’m making a mistake.

Adding that extra day and even if the stock price, maybe tomorrow, Zoom stock goes up 10 percent and I miss the perfect opportunity, so what? Maybe the more I think about it and maybe I’ll come to the conclusion that maybe I don’t need to add Zoom. Maybe there’s enough, maybe I need to be buying more Upstart. I think slowing the process down and not letting those impulses, whatever they are, make the decision is the healthiest thing most of us can do.

It is certainly the case for me. Cost basis and return based on previous market day close. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members. Calculated by Time-Weighted Return since Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

I think it’s basically confirmation that the floor underneath this stock is very, very, very secure or the floor under the company. The ceiling gets reduced as, you know, the vaccine news comes in better. There’s been a lot of that lately. And that puts a little bit of a cap on the very near-term story of Zoom. And if people get to go back to their old lives, either eventually or sooner than eventually, that takes a little bit of the helium out of the Zoom stock, but, you know, [laughs] it’s still a pretty richly valued stock.

Now, some of the guidance is a little bit cautious for , because Zoom, like the rest of us, doesn’t really know what’s going to happen. And so, the massive, rapid, profitable adoption of Zoom across so many industries and so many people is great, but will everybody stick around when they have the option not to.

And Zoom doesn’t yet know, it’s optimistic that it’s providing a service that’s going to be entrenched in people’s and businesses’ lives to a great degree, but it can’t make those promises. I think that the company is known for exceeding expectations, and the guidance that it provides. As you point out, the guidance is more conservative than Wall Street was maybe hoping for. So really, there is some inflated, you know, price earnings multiple on top of the really unbelievable growth.

But, you know, it could get cut-in-half again from here, sure, but it would still quadruple, triple what it was last year. This is similar to the recent partnership between Target and Ulta Beauty. Sephora is going to open hundreds of small beauty shops inside Kohl’s stores.

They’re aiming for by next Fall and more than by That’s ambitious, but this also seems like a smart move by Kohl’s. Barker: This is a smart move by Kohl’s. Sephora is getting out of J. And I would say what this does is, we talk sometimes floors-and-ceilings, I mean, Kohl’s was exploring what the floor was for its business back in March.

So, it still had a bad year as a stock, even though it’s more than tripled in that time period. And if Sephora were the cure-all for a retailer’s woes then J. Penney would still be thriving, right? It’s leaving intelligently, as far as picking up and taking its business away from J. Penney and going into Kohl’s, but Sephora is not on its own going to be any more able to make Kohl’s a hot retail opportunity than it was able to do so for J.

Nevertheless, Kohl’s is a better operation than J. Penney, certainly hasn’t gone through quite the disruptions that J. Penney has, but you know, keep in mind, this is more shoring up the floor than exploring the ceiling.

Hill: No. But it’s absolutely something they need to do. And it reminded me a little bit of the partnership they struck with Amazon , I’m talking about Kohl’s, of course, to provide returns within Kohl’s locations. This gives people one more reason to actually go into a Kohl’s. Kohl’s does curbside pickup, I don’t see them promoting it in the same way that we’ve seen Target and Walmart , but those two businesses have certainly provided a blueprint for what Kohl’s could be in the future.

I don’t know. I’m not buying shares of Kohl’s, but I don’t think it’s unreasonable that the stock is up today in the way that it is. So, even though it was losing on the margins, it was buying back shares and keeping that earnings per share story reasonably consistent.

It’s not going to suffer quite as much as your J. Penney, Sears , highly mall-based stores like this, but it’s still an uphill battle against Amazon.

It’s improved the online experience, but it’s got a long way to go. Hill: Our email address is MarketFoolery Fool. Question from Sean Bryan in Harrisville, Utah, who writes, “I think there may come a time when people will look back and wonder how we justified eating animal meat, at least in the amounts that we do now? If the War on Cash is followed by a “War on Meat,” what are the first three stocks you would put in that basket? It’s an interesting thought exercise, the obvious first stock is probably Beyond Meat , and if Impossible Foods goes public, they’re in there as well.

Barker: Yeah, I guess it would depend, you know, if the war is being waged against the meat processors, right. You want to stay pretty far away from Smithfield, for instance, which is now owned by China. But I think, obviously the Beyond Meats of the world are where you would, kind of, start with that.

Is poultry being taken out too in this example? By the way, I’m totally willing to entertain the notion that meat consumption is going to suffer as people become, one, they’ve got more opportunities to get a meat-like taste from the Beyond Meats, but, you know, an increased exposure to the story of factory farms and things like that, I could certainly see society turning its back and looking back on our generation and how much meat we eat and how we produce it as being something that is fairly horrifying to the future generations.

Hill: Well, to answer your question, Sean writes “eating animal meat,” chickens are animals, so, yeah, I guess [laughs] poultry is part of that as well. Barker: Yeah. Whereas poultry often, and has picked up from peoples moving away for purely health reasons, away from red meat, boy!

Barker: Yeah, I do think these are trends that need to be considered. And I think Tyson Foods is one of those things that I wouldn’t put all of my money into or Hormel or any of those. Hill: I also think it’s a trend that needs to be considered, I don’t think, for investors, this is as lucrative a trend, both, in the near-term or even in the long-term, as the War on Cash.

And likely to be a much bloodier war too. I mean, beef and the production of it are about as central to the iconography of the American experience as you can get. If you’re like me, the fact that you have never driven a herd of cattle to the slaughterhouse, it’s probably something that you consider a failure at a certain level, as an American man. Don’t you feel at some level, like, you’re supposed to have done that by now?

Zoom has been one of the major success stories of this year. Its user base has surged, resulting in its best year yet. That slowdown, however, is not yet reflected in Zoom stock, making it tough to invest in the shares at their current price. On the date of publication, Muslim Farooque did not have either directly or indirectly any positions in the securities mentioned in this article.

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Why Zoom Stock Is Down | The Motley Fool.Zoom shares tumble as revenue growth slows | Reuters

 
 

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. Cost basis and return based on previous market day close.

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members. Calculated by Time-Weighted Return since Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

The company has also provided guidance for Q4 fiscal year and full fiscal year This means that Zoom stock remains expensive even after the massive pullback from historic highs.

Current analyst consensus implies no growth on the earnings side, which is bearish for a growth stock which is trading at a rich valuation. While the company tries to position itself for a hybrid work model in the post-pandemic work, it is not clear whether the market will be patient in case the company does not show material growth in the upcoming quarters.

At this point, it looks that the risks of additional multiple compression remain elevated. In the near term, the stock may find some buyers as its RSI is close to the extremely overbought territory. In the longer-term, the company needs to come up with positive catalysts or its stock will remain under pressure.

This article was originally posted on FX Empire. Stock splits typically have led to oversized returns, says Bank of America.

Look beyond the popular growth stocks. A healthy stream of income awaits. Europe, where Tesla has just opened a production site, is an important market for the electric vehicle manufacturer and its CEO. It’s certainly understandable; getting more shares of your favorite company can bring a smile to the faces of even the most stoic among us. It’s also true that companies that announce their intentions to split their stock tend to see their share prices run up as the split date approaches.

All this buying can drive share prices up, bringing in more momentum traders and adding fuel to the fire. Energy prices are soaring. But bargain-hunter Buffett continues to bet on big oil. Stocks fell last week, but was it constructive?

And that puts a little bit of a cap on the very near-term story of Zoom. And if people get to go back to their old lives, either eventually or sooner than eventually, that takes a little bit of the helium out of the Zoom stock, but, you know, [laughs] it’s still a pretty richly valued stock. Now, some of the guidance is a little bit cautious for , because Zoom, like the rest of us, doesn’t really know what’s going to happen.

And so, the massive, rapid, profitable adoption of Zoom across so many industries and so many people is great, but will everybody stick around when they have the option not to. And Zoom doesn’t yet know, it’s optimistic that it’s providing a service that’s going to be entrenched in people’s and businesses’ lives to a great degree, but it can’t make those promises. I think that the company is known for exceeding expectations, and the guidance that it provides. As you point out, the guidance is more conservative than Wall Street was maybe hoping for.

So really, there is some inflated, you know, price earnings multiple on top of the really unbelievable growth. But, you know, it could get cut-in-half again from here, sure, but it would still quadruple, triple what it was last year. This is similar to the recent partnership between Target and Ulta Beauty. Sephora is going to open hundreds of small beauty shops inside Kohl’s stores. They’re aiming for by next Fall and more than by That’s ambitious, but this also seems like a smart move by Kohl’s.

Barker: This is a smart move by Kohl’s. Sephora is getting out of J. And I would say what this does is, we talk sometimes floors-and-ceilings, I mean, Kohl’s was exploring what the floor was for its business back in March.

So, it still had a bad year as a stock, even though it’s more than tripled in that time period. And if Sephora were the cure-all for a retailer’s woes then J. Penney would still be thriving, right? It’s leaving intelligently, as far as picking up and taking its business away from J.

Penney and going into Kohl’s, but Sephora is not on its own going to be any more able to make Kohl’s a hot retail opportunity than it was able to do so for J. Nevertheless, Kohl’s is a better operation than J. Penney, certainly hasn’t gone through quite the disruptions that J. Penney has, but you know, keep in mind, this is more shoring up the floor than exploring the ceiling.

Hill: No. But it’s absolutely something they need to do. And it reminded me a little bit of the partnership they struck with Amazon , I’m talking about Kohl’s, of course, to provide returns within Kohl’s locations. This gives people one more reason to actually go into a Kohl’s. Kohl’s does curbside pickup, I don’t see them promoting it in the same way that we’ve seen Target and Walmart , but those two businesses have certainly provided a blueprint for what Kohl’s could be in the future.

I don’t know. I’m not buying shares of Kohl’s, but I don’t think it’s unreasonable that the stock is up today in the way that it is. So, even though it was losing on the margins, it was buying back shares and keeping that earnings per share story reasonably consistent. It’s not going to suffer quite as much as your J. Penney, Sears , highly mall-based stores like this, but it’s still an uphill battle against Amazon.

It’s improved the online experience, but it’s got a long way to go. Hill: Our email address is MarketFoolery Fool. Question from Sean Bryan in Harrisville, Utah, who writes, “I think there may come a time when people will look back and wonder how we justified eating animal meat, at least in the amounts that we do now? If the War on Cash is followed by a “War on Meat,” what are the first three stocks you would put in that basket?

It’s an interesting thought exercise, the obvious first stock is probably Beyond Meat , and if Impossible Foods goes public, they’re in there as well. Barker: Yeah, I guess it would depend, you know, if the war is being waged against the meat processors, right. You want to stay pretty far away from Smithfield, for instance, which is now owned by China.

But I think, obviously the Beyond Meats of the world are where you would, kind of, start with that. Is poultry being taken out too in this example? By the way, I’m totally willing to entertain the notion that meat consumption is going to suffer as people become, one, they’ve got more opportunities to get a meat-like taste from the Beyond Meats, but, you know, an increased exposure to the story of factory farms and things like that, I could certainly see society turning its back and looking back on our generation and how much meat we eat and how we produce it as being something that is fairly horrifying to the future generations.

Hill: Well, to answer your question, Sean writes “eating animal meat,” chickens are animals, so, yeah, I guess [laughs] poultry is part of that as well. Barker: Yeah. Whereas poultry often, and has picked up from peoples moving away for purely health reasons, away from red meat, boy!

Barker: Yeah, I do think these are trends that need to be considered. And I think Tyson Foods is one of those things that I wouldn’t put all of my money into or Hormel or any of those. Hill: I also think it’s a trend that needs to be considered, I don’t think, for investors, this is as lucrative a trend, both, in the near-term or even in the long-term, as the War on Cash.

And likely to be a much bloodier war too. I mean, beef and the production of it are about as central to the iconography of the American experience as you can get. If you’re like me, the fact that you have never driven a herd of cattle to the slaughterhouse, it’s probably something that you consider a failure at a certain level, as an American man.

Don’t you feel at some level, like, you’re supposed to have done that by now? It may not be a level you could even put words into; I see you struggling, but you know what I’m talking about. Hill: I think you’re talking about the movie City Slickers , which is the only passing thought I ever had of like, I wonder what that would be like.

And then by the end of the movie, I thought, well, that was a fun movie, but, no, I’m not interested in doing that.

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