The pandemic showed Zoom (NASDAQ:ZM) stock some of its brightest days ever.
Investors holding Zoom in the first few months of the pandemic made the most of it. Zoom became a household name in no time and was a necessity for all businesses. This led to a rise in revenue and the sales of subscription software quadrupled in no time.
Zoom was reporting minimal profits before 2020 and it wasn’t a company that many investors were keeping a watch on, but it became a rock star in a few months and reported extravagant profits. ZM stock increased by 360% in the six months between March to October 2020.
Since then, it’s been more of a roller coaster for ZM stock.
Zoom went from $101 in February 2020 to $250 in that July. As the pandemic showed no signs of slowing, ZM stock soared as high as $588 in October 2020. It ended the year at $337 and rose to $433 in February, when the second wave hit nations.
However, the pandemic darling has been declining from the highs and is trading at $266 today. I think the best days of the company are over and users have also found other alternatives to Zoom for video conferencing.
It’s likely that ZM stock will continue to decline in the next few months.
Users Have Other Options
The pandemic is not over yet and several organizations still have employees working from home. However, Zoom is not dominating the market now. There are options like Cisco (NASDAQ:CSCO) WebEx and Microsoft (NASDAQ:MSFT) Teams. Earlier, Zoom was the obvious choice for most businesses, but not any longer.
The organizations that enjoy using Zoom have already adopted the software and the ones who have found an alternative are already on their way to successfully using it. Remote work could be more prevalent until the start of 2022, but a lot of users will no longer be using Zoom. Many companies have already started bringing employees back to the office and this eliminates the need to use Zoom.
The Post-Pandemic World Is Different
We have seen Zoom’s revenue decline in the last quarter and I think it will report a lower revenue in the third quarter. The post-pandemic world is different and there is no urgent need for Zoom. Companies will consider all the available options and then make a decision. Small teams and organizations may not need to use Zoom any longer.
On top of that, users have already had enough video conferences and meetings and they would prefer in-person meetings whenever possible.
The management is aware of the fact that the inevitable slowdown in growth. The hybrid work model may help Zoom, but it will not take the revenue as high as it did in 2020.
The Bottom Line on ZM Stock
Zoom was a fast-growing company and generated massive returns for investors, but it looks like the success is fading as the pandemic nears an end. The company may have generated solid revenue in the past year but it may not continue doing so. The necessity and urgency of Zoom are coming to an end and several organizations have replaced it with other software.
It is not right to say that Zoom is not a good company. It is indeed a company that catered to all our needs during the pandemic and its revenue proved its potential. However, considering the current price of ZM stock, it looks like it might not be able to deliver.
I believe the stock will continue to fall in the near future and you should wait until then before taking a position.
For now, do not zoom in on ZM stock. Wait for the third-quarter results before you bet your money on the pandemic darling.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.