The Razor’s Edge #13: Zoom And The Harsh Spotlight

Zoom (ZM) was a go-go momentum stock in its first year of trading, with revenue multiples and performance outpacing most of its SAAS (software as a service peers). That was to a degree deserved due to the company's profitable business model and competitive advantages as a smooth, easy-to use video communications platform. With the advent of lockdowns, quarantines, and social distancing to combat the spread of COVID-19, Zoom has transcended from growth stock favorite to widely known consumer brand and almost an inverse ETF of the bear market. While value investors like to grumble about the market getting irrational about growth stocks, there are some reasons to be optimistic about Zoom's prospects at least as compared to where they stood on January 1st. The increased usage of the product - while costing Zoom more to support - should both accelerate adoption for the long-term and potentially open up new avenues and use cases. On the other hand, the increased focus on Zoom has also highlighted issues the company has, most primarily with security, something hardwired into the company's fantastic success to date. We discussed the cross-currents at play here and where Zoom might be headed next. Topics Covered 2:30 minute mark - The Zoom setup 6:00 - Zoom's origin story and its advantage 14:15 - Zoom's killer app 16:30 - Questions that are beginning to arise 21:15 - The security issues 26:30 - Enterprise vs. consumer business model, and being thesocial distancing play 33:00 - Overall market description and Zoom's rise 38:15 - The competition 47:00 - Justifying the valuation? 55:00 - What sort of revenue upside is there 1:04:00 - Sorting out temporary from permanent 1:14:30 - The Zoom production studio angle 1:19:00 - China backlash 1:23:00 - Regulation 1:28:00 - A final macro note