You might think after Monday Zoom Video Communications (NASDAQ:ZM) has all but lost its mojo with investors. But off and on the price chart, ZM stock is still a leader. And now, more than ever, it’s a name to buy. Let me explain.
Don’t think for a second the trading week didn’t start off on the wrong foot for Zoom Video. Sure, shares were down 4.1% while the broader averages ramped higher, with gains approaching 7.5%. And from household heavyweights like Apple (NASDAQ:AAPL) and Home Depot (NYSE:HD) to ExxonMobil (NYSE:XOM), JPMorgan & Chase (NYSE:JPM) and even Boeing (NYSE:BA), buying triggered by ‘peak coronavirus’ optimism spread strongly through most every market sector and industry group.
But while ZM stock’s non-participation in Monday’s sure-footed rally might sting a little, don’t let anybody see you sweat a “buy” decision on your next video teleconference. And mind you, if you’re like many of us stranded in our homes, that face-to-face will be on Zoom’s trending and wildly-popular platform.
The fact is Zoom Video has seen a stratospheric 20-fold increase in use during the current pandemic. The company’s group video platform has become something of a media sensation with its Brady Bunch style layout for group talk of all kinds. And with that kind of huge success, there have unsurprisingly been a couple bumps in its road. But make no mistake, those are speedbumps, not the end of the road for this growth upstart.
Over the past couple weeks some concerns have been raised over security flaws and “Zoom-bombing” platform attacks, prompting analyst downgrades. The latest downward revision on Zoom stock by Credit Suisse to ‘underperform’ from ‘neutral’ was largely behind Monday’s assault on shareholders. Still, the analyst community hasn’t turned entirely against Zoom Video.
Currently, ZM stock maintains nine buy or ‘overweight’ ratings compared to 12 ‘hold’ recommendations and four ‘sells’ on shares. And it’s no time for bullish investors to start feeling less sure or even queasy about ZM’s prospects going forward.
According to Bernstein’s Zane Chrane, the growing pains amid Zoom’s soaring demand should be expected. Further, those issues are being addressed. And while the past month’s surge in use has been a uniquely positive one for the company, a new normal in a post-coronavirus world still points at Zoom shares having room to run.
ZM Stock Weekly Price Chart
Source: Charts by TradingView
Do investors bullish on Zoom Video need something more? If they do, support is now offered in both the broader market, as well as on the price chart of ZM stock. Monday’s high-powered rally in all the major indices offered sorely needed confirmation following last week’s more questionable, standalone S&P 500 market-based follow-through day.
Technically and on Zoom’s weekly view, Monday’s decline in share value has allowed ZM stock to challenge key support. The area is comprised of a prior breakout point from a large corrective cup-shaped base and lifetime 50% retracement level. Nice, right? And there’s more too.
Bottom-line, remember or know this, even in healthy markets like the one we’re currently in, leading stocks routinely correct by as much as 30%. As much and in an imperfect world, Zoom Video’s corrective drop of 34% from all-time-highs while leading the market over a much tougher time period, is for all intents and purposes, looking picture perfect.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits