A Moment People Have Waited for: Zoom bounces at the 50-day SMA

8 באפר׳ 2020

Zoom Video Communications has become a household name amid the coronavirus lockdown. It seems like everyone’s using it -- from coworkers to teachers and doctors.

All the excitement pushed ZM near $165 in late March. It then ran out of energy and retraced all the way back down to $110 this week.

The current zone is potentially interesting for two reasons. First, it’s at the 50-day simple moving average (SMA). In fact, this is ZM’s first pullback to that line since it started rallying in early February.

Second, the current price zone is slightly above a longer-term peak from June 2019, shortly after its initial public offering.

ZM is in the news today because of a shareholder class-action lawsuit. However, the issues resulted from its success. One was a decline in the stock price -- after a monster run. Another was that its product has a few issues. These only became obvious after its user base grew dramatically.

The company’s market cap now tops $30 billion, placing it in the same leagues with Kraft Heinz and Autodesk. Some analysts have complained about its multiples because ZM trades for more than 50 times revenue. This is high compared with other tech stocks. However, investors may be willing to pay it given ZM’s new importance in business and society. One of the big lessons of growth investing is that rich valuations are often a sign of strong demand.

ZM’s last quarterly report in March beat estimates and its next set of numbers are due in June.