2024-01-25 17:13:32 ET
Summary
- Zoom experienced explosive growth during the pandemic creating a huge cash pile, but its stock has faced a significant pullback.
- Investors may choose to hold Zoom due to belief in the work-from-home trend and expanding total addressable market.
- Zoom's strong product and brand reputation, along with its low valuation, make Zoom seem like a more attractive investment option than it is.
Investment Thesis
Background
Zoom ( ZM ) quickly became a global household name during the 2020-21 pandemic. Following a typical tech growth trajectory with over 100% sales growth in 2018 and 2019, and 90% in 2020, Zoom experienced explosive growth in 2021. With work-from-home skyrocketing due to COVID-19 lockdowns, sales surged by a staggering 325%, and the stock price soared from the mid-$60s to over $500 as users flocked to the platform. Large corporations, schools, friends catching up – everyone was trying to stay connected and productive.
This surge, however, not only pulled forward demand but also generated a massive cash pile for Zoom. Similar to other "pandemic darlings" like Moderna ( MRNA ), the stock experienced a dramatic surge in demand, generated significant cash reserves, and has since faced a significant pullback....
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For further details see:
3 Reasons Investors Hold Zoom, But Should You?