3 Reasons Why “Zoombombing” Shouldn’t Scare Investors Off ZM Stock

Naturally, with most of the country — and much of the world — stuck in some form of quarantine, it’s easy to get discouraged about the financial markets. However, a few companies have emerged from this crisis stronger than ever. One of those names is Zoom Video Communications (NASDAQ:ZM).

zoom stock
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Similar to another favorite of mine, Teladoc Health (NYSE:TDOC), Zoom’s business found massive catalysts due to social distancing and shelter-in-place protocols. Not surprisingly, then, ZM stock has absolutely skyrocketed since the pandemic began.

As we’ll discuss shortly below, Zoom Video’s subscriber growth has been enormous. Again, with corporations and later state governments requesting workers to telecommute, impacted businesses scrambled for the best solution. For ZM stock, it’s not at all insignificant that industry leaders have overwhelming chosen Zoom’s internet conferencing platform.

But as with any success story, detractors and disrupters have attempted to spoil the party. Most worryingly, the New York Times’ Taylor Lorenz recently detailed a phenomenon known as “Zoombombing.”

Similar to photobombing, zoombombing occurs when uninvited individuals disrupt a teleconferencing session. But unlike the often goofy but relatively harmless incidents of photobombing, some Zoombombing incidents have been incredibly troublesome, targeting Alcoholics Anonymous meetings and virtual elementary school classrooms with obscene and abusive content.

Unfortunately, the potential problems for ZM stock don’t end there. Privacy and security issues have become prevalent with Zoom’s platform, allowing trolls to access email addresses and other personal information.

But as problematic as Zoombombing is, I don’t think it should dissuade investors from adopting longer-term bullishness on ZM stock. Here are three reasons why.

Privacy and Security Headwinds Aren’t Exclusive to ZM Stock

First, I want to set the proper framework regarding the privacy and security concerns. Undoubtedly, Zoom’s management team must address the troubles to maintain their positive momentum. However, the heat on the company regarding this issue is exaggerated simply because Zoom is the most popular platform right now, and a newcomer to boot.

It’s easy to take all the benefits of technology for granted. Because of the many innovations that we’ve witnessed, we’re able to do things today that only the richest and most powerful corporations could do a decade ago. For instance, the camera tech that goes into every modern Apple (NASDAQ:AAPL) iPhone blows away what dedicated professional digital cameras could do 10 to 15 years ago.

But this very same technology allows bad actors to easily scale their hijinks. If people switched away from Zoom to another platform, they’d run into comparable issues. At a certain point, when you engage in any teleconferencing measure, you’re trusting other parties to act ethically.

Obviously, most abide by proper principles for conduct but bad actors will always be a part of the equation. However, let’s not pretend that this is a Zoom-specific problem. Fortunately, investors recognize this, so I don’t expect Zoombombing to seriously detract from ZM stock.

The People Have Voted

On the Thursday, April 23 session, ZM stock gained 12.5% off the back of tremendously positive news. According to management’s webinar, daily active users on the Zoom platform jumped 50% in the past month.

To put this into perspective, the ultra-popular social media platform Twitter (NYSE:TWTR) has only managed an all-time high of 33.3% growth on a quarter-to-quarter basis. And that was comparing small figures of 30 million to 40 million across the first and second quarters of 2010.

With Zoom, we’re talking about much larger numbers. On April 22, Zoom’s CEO Eric Yuan announced the company had over 300 million active users. On April 1, it had 200 million. That’s roughly equivalent to the entire country of Egypt joining Zoom in less than a one-month period.

This isn’t meant to dismiss the problems clouding ZM stock. However, it demonstrates that despite serious challenges, users prefer the convenience and intuitive user interface of Zoom. Therefore, this momentum is a greater indicator of Zoom’s trajectory rather than its shortcomings.

It’s a “Good” Problem to Have

Of course, Zoom cannot rest on their user growth laurels. If they don’t find solutions for their security and privacy vulnerabilities, telecommuters will look elsewhere. By law, they’re obligated to. Some of these Zoombombing incidents are so egregious that they would cause immediate termination in any other circumstance.

However, from another perspective, this is a “good” problem to have. In my opinion, Zoom can quickly address the technical vulnerabilities that facilitate Zoombombing. As well, the company is temporarily halting the rollout of new features until they resolve these serious concerns.

If I was leading the organization, I’d much rather have this problem than the other one of no demand. Sure, other platforms have different infrastructures that prevent the transmission of unauthorized data. However, we don’t talk about those platforms because no one is using them.

Companies spend years and millions of dollars to acquire the user growth that Zoom enjoyed in less than one month. And many fail to get off the launching pad. Without hesitation, Zoom has challenges they must address. But let’s not blow it out of proportion.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/moneywire/2020/04/3-reasons-why-zoombombing-shouldnt-scare-investors-off-zm-stock/.

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