(Nov 24): Zoom Video Communications Inc., the poster child of the so-called “pandemic winners” basket, is losing more of its luster.
The video conferencing company slumped 15% to close at the lowest since June 2020. Its latest quarter showed slowing growth as people started socializing in-person — also a trend that roiled the shares of other lockdown winners Peloton Interactive Inc. and Teladoc Health Inc. Including Tuesday’s losses, Zoom saw about US$100 billion wiped out from its market value since its October 2020 peak, which is a decline of 64% for the stock. Despite the pullback, the stock is still up nearly 500% since its 2019 debut.
Both Zoom and Peloton have given back the bulk of their gains since the pandemic’s onset, suffering lockdown withdrawal symptoms. It’s even worse for virtual healthcare company Teladoc, whose shares have slumped to February 2020 levels, a growing sign that the good times for companies that benefited from people stuck at home during Covid are ending.
What’s more, these high-growth companies could be hurt by rising bond yields, which tend to discount the present value of future profits. That led to Nasdaq 100 Index falling 0.5% on Tuesday, adding to its 1.2% decline on Monday.
Still, some analysts are expecting Zoom to bounce back citing opportunity to grow in enterprise communications and falling valuations. Once expensive, Zoom’s recent selloff has brought its valuation down to about 13 times forward sales — cheaper than many of its fast-growing tech peers.
“We certainly saw a lot from the quarter to like, but also a fair amount to pick on, especially given fears about Zoom post-pandemic,” wrote RBC Capital Markets analyst Rishi Jaluria. Piper Sandler’s James Fish said he liked the company’s “speedboats” of Phone, Rooms, Events, and the potential for advertising in the longer-term. Both have buy ratings on the stock.