Two years post-onset, it’s fair to say that the Covid-19 pandemic brought both calamity and opportunity. Among the unexpected benefactors was teleconferencing platform Zoom Video Communications (NASDAQ:ZM). The surge in ZM stock reflected a sudden shift to remote/hybrid work and collaboration.
Today, Zoom remains a household name and the dominant U.S. teleconferencing tool. However, investors are forward-looking and some of them are worried that the demand for Zoom’s software offerings will diminish.
ZM stock’s persistent slide reflects Wall Street’s waning enthusiasm for Zoom. This certainly appears to be a problem. Or just maybe, it’s a chance to own shares of a great company at a reduced price point.
Moreover, there’s a virtual-reality angle to Zoom which appears to be under-reported, but nonetheless significant. Indeed, if Zoom can successfully expand its business operations into the metaverse, investors might be ready to stop selling and start buying again.
A Closer Look at ZM Stock
While certain sectors of stocks (airlines, cruises) were crashing in 2020, ZM stock was zooming to new heights. From March to October of that year, the Zoom share price soared from $150 to $450.
That represents a 200% return on investment in a matter of months, which is astounding. Unfortunately, folks who didn’t take profits at $450 were in for a nasty ride to the downside.
Fast-forward to early February of 2022, and ZM stock was trading at around $145. That’s right: the post-pandemic gains had completely evaporated.
Perhaps this was a necessary deflating of the Zoom balloon. After all, the share-price collapse brought Zoom’s trailing 12-month price-earnings ratio down to 38.3, which isn’t unreasonably high.
Granted, if you’re holding the bag with ZM stock, you’re in a tough position. On the other hand, this could be a great time to consider picking up some shares at a deeply discounted price.
Three Big Shifts
As I alluded to earlier, some forward-looking investors may have dumped their Zoom shares due to concerns about demand destruction. At least one of the company’s top executives, however, doesn’t seem too worried about Zoom losing its relevance.
As businesses consider shifting to a hybrid work model (involving a mix of in-person and remote meetings), Ricky Kapur, head of Asia Pacific at Zoom, sees three “big shifts” which will ultimately benefit his company.
First, Kapur emphasized that businesses are looking to foster inclusive, collaborative and hybrid work environments for their staff members. “Employees are demanding flexible work arrangements and the ability to work frictionless, irrespective of where they are,” he explained.
The second shift involves companies transforming the customer- engagement experience as consumers demanding more convenience. As Kapur sees it, today’s consumers expect “the ability to live feed into the store and speak with a live person — see a product, have a real conversation, and then make a purchase decision.”
Then there’s the third big shift, which Kapur observes in areas such as education and healthcare. This shift involves digitally native companies building innovative platforms, in order to create services that reach out to new consumers.
An Immersive Experience
All three of the shifts which Kapur cited leave room for Zoom in the modern workplace. People expect businesses to be responsive and inclusive, and Zoom’s tech tools should continue to address these demands.
At the same time, there’s yet another reason to anticipate a turnaround for Zoom and its shareholders. It involves a social-media company that’s currently transitioning into a metaverse-focused business.
By now, you probably figured out that I’m referring to the former Facebook, now known as Meta Platforms (NASDAQ:FB).
For some reason, this little tidbit was barely reported on in the media. In a Zoom blog posting, the company revealed that in 2022, it expects to work with Meta/Facebook “to offer a more immersive product experience, anticipated next year, using virtual reality (VR).”
So, if this collaboration pans out, Zoom will be hitching a ride with Meta into the metaverse (or at least its close cousin, virtual reality). The plan, evidently, is for Zoom Meetings and Zoom Whiteboard to be integrated into Facebook/Meta’s Horizon Workrooms.
Using Oculus headsets, users will be able to “visualize their entire canvas without the need for a large screen.” The Zoom Meetings and Whiteboard integration in Horizon Workrooms is anticipated to take place during the first half of this year, apparently.
The Bottom Line
Now that ZM stock has come back down to Earth, Zoom’s valuation is more reasonable than it was a year ago. This is good news for contrarian investors who were waiting for a buying opportunity with Zoom.
Clearly, Kapur isn’t overly concerned about Zoom losing its relevance. There are major business shifts happening right now, which should allow Zoom to remain top-of-mind.
Additionally, the Meta/Facebook collaboration could prove to be one of 2022’s most impactful partnerships. As Zoom ventures into new virtual worlds, ZM stockholders can prepare for a new and hopefully profitable phase in the company’s ongoing evolution.
On the date of publication, David Moadel 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.
