Can Zoom Do It Again?

Written by Jennifer Clark
Posted January 13, 2021

It’s 2021, but some of what we’ve grown accustomed to in 2020 will naturally come over into the new year. What I’m talking about today has to do with the U.S. technology company, Zoom Video Communications (NASDAQ: ZM), and the major growth of its video telephony and online chat services.

Most smartphones have had apps available to make video calls for years. Apple (NASDAQ: AAPL) users have had the ability to FaceTime as far as I can remember, so the concept of being able to call one of your contacts and have a video call isn't new. However, video calls definitely weren't the norm, and you most definitely couldn't call multiple people in the same call. I could count on both of my hands the number of times I talked to someone on FaceTime. 

Then the coronavirus pandemic hit and most of the world went in lockdown to stop the spread of the virus. People needed a way of communicating with loved ones, and businesses needed a way to collaborate with their coworkers. Not only were people working remotely and hanging out remotely with friends and family, but students needed to attend school remotely. Thus, the demand for a secure platform that could provide businesses, educational systems, and individuals the opportunity to go about their new lives as normally as they could, surged. 

Zoom Video’s stock surged almost 400% in the last year because of the COVID-19 pandemic, turning the company into a household name. Everyone was having meetings and hangouts on Zoom.

The company went public on March 22, 2019. As a newly public company, it was gaining an immense amount of popularity. Zoom’s services are offered in dozens of countries and territories worldwide. However, with the vaccine here and the distribution slowly happening, it makes you wonder if Zoom meetings will become a thing of the past. 

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Students will be going back to school and taking their classes in person. Most businesses will go back into their offices and people will be able to go out and hang out with their friends and family in public areas again. What will Zoom Video have left after the world returns to this normalcy? Is the company hoping that people will get used to Zoom meetings and calls and will continue using the platform to connect with people who are in different states or countries?

Zoom was an attractive option at the beginning of the pandemic because it had a free tier that allowed for group calls for up to 40 minutes. Groups that extended those 40 minutes would be roped into Zoom’s paid tiers, which extended the time limit and added premium features like cloud-based recording, transcripts, and single sign-on. 

Because of this, the company was able to generate revenue from those who upgraded to its paid tiers. The company’s revenue increased by 88% to $622.7 million in the fiscal year of 2020, which was nothing compared to what the company saw in the first nine months of 2021. Zoom’s revenue skyrocketed to 307% year-over-year to $1.77 billion. Zoom claimed that during the peak of the pandemic lockdowns in April, it had about 300 million active participants per day who were hosting meetings. 

While this stock would have been one to identify earlier in 2020, it might not carry that same momentum going into 2021. As I mentioned earlier, slowly but surely, people will be returning to public life and will be socializing, going to work, and taking classes in-person. The need to be online in a Zoom meeting will dwindle. It’ll be another app that will be occasionally used.

However, there is still potential for Zoom to gain business users since some companies have announced that they will remain working remotely, but it will never be close to the numbers that Zoom saw during peak pandemic lockdowns and throughout the rest of 2020. 

Until next time, 

Jennifer Clark
Pro Trader Today
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