Zoom shares slip over security concerns and rising competition

Platform Industry: Zoom meetings

Shares of Zoom fell by 8% yesterday, adding to their sharp declines in the past few days, as the video conferencing app battles privacy concerns and increased competition from deep-pocketed rivals. 

The stock had previously urged to a record high in March as demand for the video conferencing app skyrocketed with millions of people around the world choosing to use it for everything amid the global lockdowns imposed to slow the spread of coronavirus.

But multiple reports last week that questioned the company’s data privacy practices have spooked investors, erasing over a third of the company’s market value from its record high.

The stock was last down 7.9% at $118.05 on Monday, which placed it among the worst performing stocks in the Nasdaq index.

Brokerage Credit Suisse downgraded Zoom Video Communications Inc’s stock to “underperform” from “neutral”. Analysts on average rate the stock “hold”, according to Refinitiv data.

“While implied new customer growth may seem undemanding compared to recently disclosed 20x participant growth, we expect much of the recent surge will prove ephemeral, and/or comes from free users or education, which are very difficult to monetise,” Credit Suisse analysts wrote in a note.

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Last week, at least two US state attorneys had sought information from Zoom following multiple reports that questioned its privacy and security.

Some school districts in the US have started to ban the app for online learning from home because of growing security concerns, while the New York City Department of Education said teachers should instead work through Microsoft Teams, Washington Post reported on Saturday.

Reuters also reported last week that Elon Musk’s rocket company SpaceX had banned its employees from using Zoom, citing “significant privacy and security concerns.”

While analysts believe that many issues, especially those originating from user error, are likely to get solved in the short term, others could remain for some time.

“Encryption concerns have already caused some high profile customers to curtail Zoom usage, and we expect others could follow though the majority of organisations likely have no issue,” Credit Suisse analysts said.

The company’s daily users ballooned to more than 200 million in March from a previous maximum total of 10 million, CEO Eric Yuan said last week.

Microsoft’s Teams, which directly competes with Zoom, had some 44 million users globally as of the 18th of March. Microsoft recently stated that it had more than doubled the 20 million daily active users it reported in November.

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The team at Platform Executive hope you have enjoyed the ‘Zoom shares slip over security concerns and rising competition‘ article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Akanksha Rana in Bengaluru. Editing by Shailesh Kuber, Saumyadeb Chakrabarty and Aditya Soni.

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