Zoom Video Communications Inc (ZM) had another amazing quarter with a revenue jump of more than 350%, but the stock is crashed 15%. However, Zoom stock has rocketed over 580% this year due to the coronavirus pandemic.
So investors may be scratching their heads and wondering, “Why is Zoom stock down?” The short answer is because of two reasons: Coronavirus vaccines and a decline in gross margins.
Coronavirus Vaccine: Experts have projected we will see at least two vaccines released shortly to the public. President Trump has promised super fast delivery of the vaccines. Once the vaccines are in the public, it is expected that businesses will rop Zoom and start doing business in person. The most optimistic timeline for this drop off would be approximately 3 months or the end of February.
|AD - Recover your investment losses! Haselkorn & Thibaut, P.A. is a national law firm that specializes in fighting ONLY on behalf of investors. With a 95% success rate, let us help you recover your investment losses today. Call now 1 888-628-5590 or visit InvestmentFraudLawyers.com to schedule a free consultation and learn how our experience can help you recover your investment losses. No recovery, no fee.|
Chaim Siegel, an analyst at research firm Elazar Advisors, lowered his rating on Zoom stock from strong buy to buy. “(T)here’s going to be perceptual headwinds with Pfizer’s vaccine.”
Declining Gross Margins: Zoom has a serious problem when it comes to scaling and gross margins. As the company scales, it has seen a decline. Before the coronavirus, Zoom had an 80% gross margin, compared to a 66.7% now. It will likely continue to trend this way because of free users.
Zoom is well aware of their dwindling margins and trying to address it. Kelly Steckelberg, Zoom Chief Financial Officer, stated on a video conference call this week that gross margins are expected to remain under pressure because of the surge in free users and increasing server costs.
Is Zoom Stock (ZM) A Buy?
As much as I like Zoom stock (ZM), at this time I don’t believe it is a buy. My personal experience is that stocks like Zoom are great if you catch the trend before everyone jumped on, but are also the best to jump off before everyone else does. Investors that have positions should consider winding them down. Although I don’t think the ZM will crash and become bankrupt, it is ripe to take a major drop because of the coronavirus vaccines, declining margins, and sudden rise in price.
Zoom Stock Pivots
Zoom Stock 1 Day Moving Averages – BEAR
|Exponential Moving Average (5)||444.27||Sell|
|Simple Moving Average (5)||448.4||Sell|
|Exponential Moving Average (10)||440.38||Sell|
|Simple Moving Average (10)||434.28||Sell|
|Exponential Moving Average (20)||444.04||Sell|
|Simple Moving Average (20)||435.44||Sell|
|Exponential Moving Average (30)||447.8||Sell|
|Simple Moving Average (30)||458.92||Sell|
|Exponential Moving Average (50)||440.94||Sell|
|Simple Moving Average (50)||474.18||Sell|
|Exponential Moving Average (100)||394.25||Buy|
|Simple Moving Average (100)||389.42||Buy|
|Exponential Moving Average (200)||313.12||Buy|
|Simple Moving Average (200)||278.67||Buy|
|Ichimoku Cloud Base Line (9, 26, 52, 26)||460.07||Neutral|
|Volume Weighted Moving Average (20)||428.53||Sell|
|Hull Moving Average (9)||465.95||Sell|