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Why Zoom Stock Is Down By 17% Today.

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Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources , and more. Learn More. Zoom Video Communications ZM Now the pendulum on the stock has swung in the opposite direction.

Is the stock doomed? Or will this falling knife again find an upward trajectory? Here is what you need to know. Both users and investors flocked to Zoom in With lockdowns in full force, people “Zoomed” with friends and family, students Zoomed for school, and businesses Zoomed with clients.

The world definitely took on a digital focus. Despite this blistering revenue growth, the stock price somehow outran it. The stock’s price-to-sales ratio shot as high as , making Zoom one of the most expensive stocks on the market at the time.

ZM data by YCharts. It only makes sense that as pandemic lockdowns eased and Zoom’s temporary surge in growth faded, investors would begin to cool on the stock. The stock price decline has been steep, possibly pushed lower by a broader market sell-off among growth stocks in But just because Zoom couldn’t maintain its triple-digit growth rate, it doesn’t mean the company isn’t still thriving.

In the third quarter of fiscal ending Oct. Zoom Phone, which is the company’s new unified communications app , is helping drive this spending. Management reported in Q3 that Zoom Phone saw triple-digit percentage revenue growth year over year.

A growing company like Zoom is often unprofitable, but Zoom has strong financials already. This shows that Zoom’s profitability is accelerating as revenue is now outrunning the company’s costs. The stock market can be irrational and stock traders are prone to overreact to things.

Zoom’s stock was definitely overpriced at its peak, but the momentum has swung so far the other way that the stock is now arguably a bargain. The stock price has now fallen to pre-COVID valuation levels, despite the business’s continued growth. Its price-to-earnings ratio of 34 is less than that of a consumer goods company like Nike , despite growing EPS at a triple-digit percentage rate.

It’s becoming harder to ignore Zoom based on the current valuation and substantial numbers it’s put up. If there is a worry for investors, it’s probably competition with Microsoft. Microsoft is much larger than Zoom, making it a formidable competitor with deep pockets.

Zoom, of course, competes with Microsoft Teams , which is a crucial cog in Microsoft’s grip on the enterprise market. Investors will want to monitor Zoom’s revenue growth and management’s comments on customer account growth to ensure that Zoom competes well. I think that there’s room for more than one winner in such a large market, but if Zoom starts losing so much business that its growth begins declining, investors might reconsider their stance on the stock. Cost basis and return based on previous market day close.

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Why Zoom Stock Is Down By 16% Today.Why Zoom Stock Tumbled 15% in April | The Motley Fool

 

Shares of Zoom found themselves under strong pressure after the company released its second-quarter report. Zoom explained that it faced headwinds as workers got back to their offices while students moved back to schools. The company also noted that demand from small customers declined, while demand from large firms remained strong. Such valuation implies fast growth but Zoom is facing headwinds. The company stated that the return to work was its main near-term problem, but the market will also take a look at the possibility of increasing competition from products like Microsoft Teams.

It remains to be seen whether the significant pullback will attract speculative traders as slowing growth is traditionally considered to be a dangerous catalyst for richly-valued stocks like Zoom. At the same time, it should be noted that one quarter without growth is not the end of the world for Zoom, and the company may move back to the growth trajectory in This article was originally posted on FX Empire.

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Although big drops in the stock market can be unnerving and tug on investors’ emotions, they’re also, historically, an excellent time to put your money to work.

Corrections and bear markets tend to run their course relatively quickly, and all notable declines throughout history have eventually been erased by a bull market rally.

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Dow 30 32, Nasdaq 12, Russell 1, Crude Oil Gold 1, Silver CMC Crypto FTSE 7, Nikkei 27, Read full article. Vladimir Zernov. Zoom Stock Dives As Q3 Guidance Disappoints Shares of Zoom found themselves under strong pressure after the company released its second-quarter report. Story continues. Recommended Stories. The Independent. Motley Fool. Investor’s Business Daily. Yahoo Finance.

 
 

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