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Zoom: The Next Step in Video-Conferencing

05/24/2019 5:00 am EST

Focus: TECHNOLOGY

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Among the market's recent IPOs, we’re most intrigued by Zoom Video (ZM), which is playing in a massive market, sports lightning fast growth and has a stock that’s well traded (north of $100 million per day), observes technology expert Mike Cintolo, editor of Cabot Top Ten Trader.

The company looks like a disruptive player in the video conferencing market, which, despite being around for years, is still riddled with issues; one firm estimates 94% of virtual meetings are still audio only because current solutions have too many snafus.

Zoom’s solution is built from the ground up as a cloud-native, video-first platform that includes proprietary multimedia router optimized for the cloud and a global architecture. By contrast, many competitors have simply added video on top of platforms that were originally built for conference calls or chat.

The result: Far higher ease of use, higher-quality video and many loyal customers, thanks in part to its 24/7/365 customer support. A striking example: One hospital uses Zoom to connect specialists live into the operating room to improve and quicken surgeries.

All told, the videoconferencing market is huge ($11 billion estimated in 2023), but the ultimate potential market could be quadruple that as Zoom’s solution catches on and more firms and entities are enticed to switch from audio to video.

Zoom’s revenues grew at triple-digit rates last year, with the firm eking out a small profit. Of course, the valuation is massive, so there’s risk, especially with a quarterly report coming out on June 6. But the story and numbers cant be ignored.

ZM priced its IPO at $36 but closed its first day of trading at 62 and quickly soared to $80 in early May. Even better: As the market has wobbled during the past two weeks, this stock held relatively firm, and as soon as the pressure came off the market last week, ZM exploded to new highs above $90.

Obviously, volatility here is going to be off the charts, especially with earnings coming up. If you want in, keep positions small, aim for dips and use a loose leash — or just keep it on your watch list and see what earnings bring.

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