(CTN News) – Since its epidemic in October 2020, Zoom Video Communications Inc. (ZM.O) stock has lost approximately 90% of its value as the erstwhile investor darling struggles to adapt to a post-COVID world.
The business lowered its annual sales projection and reported its weakest quarterly growth, which led at least six brokerages to lower their price targets, and the stock was down over 10% on Tuesday.
The business is attempting to reinvent itself by focusing on businesses with products like the cloud-calling service Zoom Phone and the conference-hosting offering Zoom Rooms.
The company, which became a household name during lockdowns due to the popularity of its video-conferencing tools, is trying to reinvent itself.
Analysts predict that any economic revival would take many quarters because of slowing growth in its core web business and increased competition from Microsoft Corp.’s (MSFT.O) Teams, Cisco (CSCO.O) Webex, and Salesforce (CRM.N) Slack.
“The main problem with Zoom is that it has to spend a lot of money to maintain its market dominance. Spending to maintain market share rather than increase it is never a smart idea and was a foreshadowing of problems to come, “Sophie Lund-Yates, an equities analyst at Hargreaves Lansdown, said.
Due to increased spending on product development and marketing, the company’s operational expenditures increased by 56% in the third quarter.
Its adjusted operating margin decreased from 39.1% to 34.6% from the previous year.
However, Chief Executive Eric Yuan said on a post-earnings conference that he continues to observe more deal scrutiny for new business.
Some brokerages think acquisitions might help Zoom recover its growth.
According to Needham & Co analyst Ryan Koontz, “the game is not over for them, but without acquisitions, this is a multi-year route to returning to greater growth.”
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