What’s going on?

Zoom (2020’s most popular communications platform) reported better-than-expected earnings, but investors seem to think it’s already an antique.

What does this mean?

• As kids and adults are getting back to school and offices, investors are worried that Zoom’s once-strong growth is fading when comparing Zoom’s 54% yoy growth in Q2/2021 vs the 191% in Q1/2021. That deceleration seems to be expected to continue, with Q3/2021 growth forecast of only 31%.
• Zoom is buying firms that specialize in other areas, with its first major announced target to be Five9 (a cloud software provider that helps companies run their online customer support operations). This type of business is expected to boom even when the world fully reopens.

Why should I care?

The bigger picture: Shall we turn back time

• Zoom is in the same team as Netflix and Peloton to be stocks that benefited most from the pandemic. They are also they ones to be dumped quickly by investors, as those gains have started to disappear.
• Zoom’s shares were sent down more than 15% since the start of 2021 – a pretty dramatic fortune reversal, considering its quintupled value in 2020.

Zooming out: An identity crisis for Robinhood

At least Zoom’s entire business model isn’t at risk, unlike Robinhood (commission-free trading platform), which makes huge revenue selling its customers’ orders to market makers (“payment for order flow”). The practice is under threat of an outright ban (said the head of a US stock market regulator), which saw Robinhood’s shares drop by 7%.

Content source: Finimize (2021) OK, Zoomer. Available at: https://www.finimize.com/wp/news/ok-zoomer/ [Accessed on Sep 6, 2021]