Personal Experience with ZM and Post-COVID ZM

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!

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I think undoubtedly over the next year or two there will be significant churn in smaller companies like your or among individuals using it for family, which Bear discussed very well in his post. Larger companies are just as likely to expand remote working and meeting as they see how much it saves on real estate. For example my wife was told by a top 20 company by revenue that she will no longer have the option to work in the office. The company also saves on electricity, water, furniture, etc.

She was also gushing about how fun it was to video call with a group of friends given the quarantine. I pointed out to her that none of the people in the call were in the same city, and that they hadn’t seen each other in person for a year or more. So really their video call would make sense even without the quarantine. I think many families and friends will realize this and keep their accounts for this reason.

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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.

An earlier post discussed the WFH phenomenon and how likely it will stick post-pandemic. You should find useful observations there. Also, the post notes the possibility that the pandemic may last longer than the most optimistic expect. We hope for a vaccine soon, but it may not happen. The longer the pandemic lasts, the stickier the WFH changes will be.

https://discussion.fool.com/richard-this-new-remote-working-para…

I’ve spoken with several friends in various occupations (including banking and law), and they’ve reported that their work productivity has increase with WFH using Zoom.

Also, in a post from March 16, mattmacauley made an excellent point about Zoom’s potential to be so much more than just a video chat company. Here’s an excerpt:

Beyond getting entrenched in business and education, their “bread and butter”, what else uses video platforms that could be improved or where Zoom could make an impact? . . .
I don’t know what the vision of management will be. . . . But it wouldn’t surprise me if in 15 years, we look back, and see that Zoom to “video chat” is comparable to what Amazon, Google, Netflix, and Facebook are to online stores, search engines, streaming movies, and social media. While it’s their bread and butter, they’re so much more than that.

https://discussion.fool.com/zm-in-15-years-34440249.aspx

If Matt is right, then Zoom has additional reasons to justify its market cap. If he’s wrong, and Zoom remains just the leader in video chat, then it still has growth ahead.

All the best,

Raymond

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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.

What if the new normal is just a little bit different?

For example, one small example…suppose that college classes, to be competitive, ALL have to live stream just in case there is one student who is sick in the dorm? Now that the schools have been forced to figure out how to do this they will probably keep it forever.
Just take note of the planning going on at schools for what happens in the fall.
Add in K-12 as well.

Businesses are already on board with video conferencing…they will just be using it more.

Mike

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