First of all, congratulation to all of you who had convictions strong enough to weather the negative news our media has thrown at ZM. My conviction was not firm enough, and I missed the first two-bagger in my life. And also congratulation to ZM, which had a very strong quarter, although some might have expected it to be more spectacular.
Looking at the calendar this morning, I realized that it has been exactly a year I came across Zoom. I joined a nascent startup company after college graduation last June, and my first task was to figure out how to run our weekly team meeting. A video conference was the only option since since some team members were off-site due to visa issues. After some googling, I found Zoom, which looked much accessibly than Skype and MS Teams. Since then, all our internal meetings were run via Zoom.
Unfortunately, it was not until the COVID that I realized ZM was actually on the stock market. I learned that from this board. Although the stock had appreciated significantly already, I added some positions since I liked the company. Then, as we all know, the media overwhelmed us with the news about ZM’s possible relationship with China, its security vulnerability, etc. At one point, our company had to temporarily switch to MS Teams because some customers refused to use Zoom for meeting. Also, I became personally uncomfortable with my holding. ZM had appreciated even more, and to me, the stock appeared to be too hot. I could not justify the valuation of the stock to myself. However, as Saul noted in his end of May portfolio review, our SaaS companies seem to defy the traditional notion of stock valuation, as we’ve witnessed how quickly they recovered from the COVID and rather leveraged it to exponentially grow.
It is a bit disappointing that I missed this opportunity, but I am so happy that Zoom has become so widely known that I do not have to explain what Zoom is whenever I arrange a meeting with other companies. I believe that the company will fare well in the long term. Google and Facebook are jumping into the market as well, but I believe Zoom’s accessibility and simplicity will give them an edge over other competitors. At the least, our company does not plan to switch to other platform anytime soon.
But there is one question I would like to ask to those of you who have held and intend to continue holding Zoom:
Currently, the video conference call user number has dramatically increased due to WFH. Given that the market has grown enormous, ZM’s market cap can be justified at this point. However, once the world overcomes the virus, and our normal returns, the number of users will drop for sure, although many of us will stay with Zoom. For example, during the lockdown, our company has increased the number of subscription accounts from 1 to 3 because we had to host multiple meetings in a single day. However, I doubt that we will need all three accounts after COVID, and I think the same might apply to many smaller companies, who would like to save as much money as possible. What will ZM be able to prevent/mitigate such drop in its subscribed users and revenue? Some people say that posting advertisements on meetings held by free accounts might be another source of income, but I think it might do harm on ZM’s reputation, as advertisements might make the platform look unprofessional.
Thank you in advance for all your input!