With Competition Heating up, Things Will Get Interesting for ZM Stock

When you’ve got a good thing going for you, there are going to be copycats. That’s where we are with Zoom (NASDAQ:ZM) and a sudden rush by big tech companies to get in on the remote meeting business.  Whether it’s too late to copy all the ZM stock buying that’s going on is another question altogether.

With Competition Heating up, Things Will Get Interesting for ZM Stock

Source: Michael Vi / Shutterstock.com

As companies began working remotely and schools shut their doors. Families were forced to look for ways to celebrate spring holidays like Easter and Passover with Grandma and Grandpa without driving over for a holiday meal.

Zoom’s simple interface helped fill the bill. A meeting organizer merely signs up for an account and gets a dedicated URL, which they send out to meeting participants.

Once you go online, participants can see the speaker, or they can view a Brady Bunch-style grid on their computer to see video feeds of everyone at once.

Heck, Zoom quickly became so synonymous with video meetings that it’s nearly a synonym at this point. Looking at the search volume reported by Alphabet’s Google (NASDAQ:GOOG, NASDAQ:GOOGL), and you’ll see the daily searches for “Zoom” dwarf anything offered by the competition.

But there are growing pains.

ZM Stock and the Competition

Remember, as a public company, Zoom is in its infancy. It was founded in 2011 but just went public a year ago, and arguably was not ready for the massive influx of business that came its way when the novel coronavirus hit.

Most notably, it had security concerns and privacy concerns. Hackers have had a field day breaking into meetings and disrupting them with threats, racist messages and homophobic remarks. It’s gotten bad enough that some school districts that are doing distance learning are telling teachers to avoid the Zoom platform entirely.

Mistakes like that open the door to competitors who are better financed and, perhaps, better at dealing with privacy and security issues. Microsoft (NASDAQ:MSFT) was already working on replacing its Skype platform with Microsoft Teams, which is already seeing a boost in traffic.

Microsoft announced during its first-quarter earnings call that Teams has 75 million daily active users, an increase from 44 million in just a month.

Meanwhile, Alphabet’s Google announced this week that it is giving away its Meet video chat product starting in May. Giving it away. That’s a direct shot across the bow of Zoom headquarters.

And Facebook (NASDAQ:FB) announced it is rolling out a new platform on its Messenger app called Messenger Rooms. And in its announcement, it notably uses the same terminology as Zoom “rooms” while taking a not-so-veiled shot at Zoom’s privacy issues.

“When you’re invited to a room, you can join from your phone or computer — no need to download anything to get started. When you create a room, you choose who can see and join it. You can remove people from the call and lock a room if you don’t want anyone else to enter.”

Those growing pains continued this week when Zoom had to roll back its claim that it has 300 million daily active users. That would be a huge number, but it’s just not true. It updated its April 22 statement to say 300 million refers to daily meeting participants – meaning someone who attends two meetings in a day is counted twice.

That’s an embarrassing mistake that Zoom can’t afford to be making.

Zoom Stock at a Glance

Fortunately for Zoom, it has the advantage of being in the catbird seat. It’s the company that everyone is chasing, and it’s done the best job so far at capitalizing on the public’s demand for video conferencing.

The question is, can it maintain its advantage?

ZM stock is up a huge 115% so far in 2020, outpacing even analyst coverage that has a consensus price target of $121. In the company’s most recent earnings report, for the fourth quarter of 2019, ZM reported revenue increasing by 78% year-over-year to $188.3 million, and fiscal 2020 revenue of $622.7 million, up 88% from the previous year.

The challenge for ZM stock will be for management to keep its advantage in the wake of competition from bigger competitors. It made a good move recently when it announced that it is working with Oracle (NYSE:ORCL) to host meetings on its cloud, allowing Zoom to increase its bandwidth. Zoom says it chose Oracle for “its advantages in performance, scalability, reliability and superior cloud security.”

And there’s another advantage – Oracle’s not competing with Zoom.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2020/05/competition-heating-up-interesting-zm-stock/.

©2023 InvestorPlace Media, LLC