Pros and Cons of Investing in Zoom

OVERVIEW

Zoom Video Communications Incorporation is a company based in the United States. The company sells video communications and other related software to customers around the world. The company was founded in 2011.

PROS:

  1. Zoom is a great growth play in an investor’s portfolio. The company continues to see rising demand for its services even in the post-pandemic world as companies shift to a work-from-home workflow, something that causes people to utilize Zoom software. This will benefit the company and its investors.
  2. Zoom will continue to benefit as COVID-19 cases rise around the world due to new variants and low vaccination rates. Rising COVID cases cause governments to shut down the country and ask people to stay indoors. This will increase the use of Zoom software in those specific markets, something that will help the company maintain strong sales.
  3. The COVID-19 pandemic forced everyone to use the company’s software, something that has helped some get used to and enjoy using Zoom for the long term. This will help Zoom grow its business in the long term as businesses will continue to use Zoom for future communication needs.
  4. Zoom recently acquired Five9, a cloud contact center software provider, for 14.7 billion. This will help Zoom position itself better for a post-pandemic world as the company has further diversified its product portfolio. This large purchase (the second-largest US acquisition for 2021) also shows that Zoom can leverage this pandemic growth in the long term.
  5. The company reported rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has benefited the company as they have been able to grow their business and acquire other companies. This has also benefited investors in the company. In the financial year of 2021, the company reported revenues of around 2.65 billion and profits of around 672 million. Both of these metrics are higher than what the company reported in the financial year of 2020 when they had revenues of around 622 million and profits of around 25 million.

CONS:

  1. The company faces tough competition in the software video communications industry. Some of these competitors include Google, Microsoft, Apple, Cisco, and many others. This competition might hurt the company and its investors.
  2. Zoom still faces some questions about its growth in the short to mid-term. This is because the company faces tough compares from one year ago ( the company saw skyrocketing demand) and now where people are going back out and not using Zoom as frequently as before. This might hurt the company’s earnings in the short to mid-term, something that will hurt the company’s stock price.

MY OPINION

I think that Zoom is a great long-term investment due to its position as a good growth play, new COVID-19 variants, new long-term trends caused by the pandemic, rising revenues, and profits, as well as a new acquisition of Five9. However, tough competition and slow growth in the short to mid-term might hurt the company and its investors.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.