Stock Market: You wish you would have invested in Zoom stock…
Written by: Maria Opie
Before the covid 19 pandemic, the world was already on a constant search for more ways to become connected. Whether it was through Instagram lives, Snapchat stories, or Facetime, we were constantly video chatting. However, when the pandemic forced everyone to quarantine into their homes, we were forced to only connect virtually. Thus, the rarely used Zoom suddenly became in the spotlight. It seemed overnight Zoom emerged from the background and became at the forefront of every business, school, and organization as people needed ways to connect with one another face to face - but through a screen. Many were, and still are today, very thankful for the resource that allowed us to connect, and continues to allow us to connect face to face through a screen. However, those that are most thankful for Zoom are definitely those that invested in Zoom stock before or at the beginning of the covid-19 pandemic.
To begin to understand why those that invested in Zoom stock prior to our current pandemic are extremely thankful for Zoom, we must first have a basic understanding on how the stock market works. When someone owns “stock” in a company, it means that they have partial ownership, which represents a proportionate claim on the companies net profit and its assets. Many small companies need to sell shares in order to raise enough capitol in order to lease an office, hire employees, create a distribution network, etc. However, people often buy shares of companies when they feel that company will soon start creating a larger profit. This is because as the company expands and starts to prosper, the price of the stock that they bought will increase because the company's net worth increases. Then, buyers can make a profit if the price of their shares increases by selling their shares to other buyers.
According to CNBC, when looking at the stock prices of Zoom, Zoom’s stock price increased 569% this year. Which increased its market cap to $129 billion. This market cap puts Zoom larger than the International Business Machines Corp (IMB) and Advanced Micro Devices Inc. (AMD). On August 31st 2020, Zoom reported that the revenue from that quarter, which ended on July 31 2020, increased by 355% when comparing it to that quarter from the previous year. This puts Zooms shares at an increase of 369% since the beginning of the year. This means Zoom’s shares from the beginning of the year are currently booming.
Let's set up an example to see the profit increase of those that invested in Zoom stock on December 31st of last year. On December 31st 2019, the price of one share was $68.04. Therefore, if a person bought ten shares on December 31st, it would have cost $680.40. However, the current price of one share is $399.90. This means, if that person still owned their ten shares, their shares would have a value of $3,999. Giving them a profit of $2638.56 if they were to sell their shares. Therefore, this is why though the world may be thankful for the connections that Zoom has allowed us to share via the internet during our pandemic, Zoom shareholders are the most thankful for Zoom this year because of the vast money it has made them.
This image shows the growth of the zoom stock up until its peak period.
However, as of November 10th, according to investors.com, currently Zoom stock is not currently in a buy zone. They explain that buyers should wait for a new base to form. After the news that a vaccine would be released, stocks began to slightly fall, decreasing by 35% from it's all-time high. However, experts believe that even after the covid-19 pandemic, Zoom will continue to be prominent in business and schools. Even with other competitors emerging into the new market such as Microsoft and Google, Baird analyst William Power explained in a report to clients that, “Zoom has established a significant beachhead [to other companies]” and that "Even with a return to more normal lifestyles, we believe there are a plethora of use cases that will continue to resonate for businesses and consumers, significantly expanding the historical total addressable market," (Krause). This shows that consumers should not sell their shares currently, but rather wait because of the prominent way Zoom has changed the ways schools and businesses are run. Therefore, shareholders that are thankful they bought shares early, should not stress if they didn’t sell their shares during the peak of Zoom stock. They can rest knowing Zoom will continue to grow as the market expands. Either way, investing in Zoom early in the pandemic has made many thankful to Zoom for more than just the connections it allowed.
Works Cited
Hayes, Adam. “A Breakdown on How the Stock Market Works.” Investopedia, Investopedia, 28 Aug. 2020, www.investopedia.com/articles/investing/082614/how-stock-market-works.asp.
Jordannovet. “Zoom Shares Soar after Revenue More than Quadruples from Last Year.” CNBC, CNBC, 1 Sept. 2020, www.cnbc.com/2020/08/31/zoom-zm-earnings-q2-2021.html.
Krause, Reinhardt. “Is Zoom Stock A Buy Right Now? Here's What Earnings, Charts Show.” Investor's Business Daily, 10 Nov. 2020, www.investors.com/news/technology/zoom-stock-buy-zm-stock-sell/.
Levy, Ari. “Here Are Incredible Stats about Zoom Following Its Blowout Earnings Report.” CNBC, CNBC, 1 Sept. 2020, www.cnbc.com/2020/09/01/here-are-incredible-stats-about-zoom-following-its-blowout-earnings-report.html.
Sun, Leo. “Where Will Zoom Video Communications Be in 1 Year?” The Motley Fool, The Motley Fool, 4 Sept. 2020, www.fool.com/investing/2020/09/04/where-will-zoom-video-communications-be-in-1-year/.
