Zoom stock has fallen by 90% since its all-time high as the pandemic boom wanes.
Zoom plans to rebrand itself by concentrating on services and products such as its Zoom Phone and Zoom Rooms conference-hosting offerings.
As the company, which was once a darling of investors but is now struggling to adapt to a world without COVID, Zoom Video Communications Inc. shares have dropped by around 90 percent since their epidemic high point in October 2020.
Following the news that the firm had lowered its annual sales projection and reported its slowest quarterly growth, at least six brokerages reduced their price targets for the shares, which resulted in the stock dropping over 10% on Tuesday.
Because of the widespread use of its video-conferencing tools during lockdowns, the company quickly became a household name. Now, the company is attempting to reinvent itself by concentrating on businesses and offering services and products such as the cloud-based calling service Zoom Phone and the conference-hosting offering Zoom Rooms.
Analysts, on the other hand, believe that any kind of turnaround in the business is still a few quarters away as a result of the slowing growth in its mainstay online unit and the increasing intensity of competition from products such as Microsoft Corp.’s Teams, Cisco’s Webex, and Salesforce.com’s Slack.
“Zoom suffers from a fatal fault in that it must incur significant costs in order to maintain its current level of market dominance. Spending money to maintain market share rather than increase that share is never a sensible strategy and was a clue that disaster was on the horizon “According to the equity analyst at Hargreaves Lansdown, Sophie Lund-Yates.
As a result of increased spending on product development and marketing during the third quarter, the company’s operational expenses skyrocketed by 56%. After adjusting for expenses, the company’s operating margin came in at 34.6%, down from 39.1% a year earlier.
The Chief Executive Officer of Zoom, Eric Yuan, stated during a post-earnings call that he continued to witness heightened transaction scrutiny for new company, despite the fact that some brokerages believe acquisitions could assist in reviving growth at Zoom.
According to Ryan Koontz, an analyst at Needham & Co., “The game is not finished for them, but this is a multi-year path to returning to greater growth.” If they do not make any acquisitions, “the game” will continue.
