ZM Convert

Investment Analysis Clubs Saul’s Investing Discussions
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So…I bought a starter in ZM today… (he typed sheepishly…)

Not buying ZM earlier has been a huge mistake for me. I had cash available earlier this year. I saw ZM recommended very strongly (not here - somewhere else). I made a snap judgement (based on little info) that I thought CSCO, MSFT, GOOG, AMZN, or FB could easily copy the idea, offer it for free, and take market share. Even when presented with counter-arguments, I stubbornly refused to really look into ZM. I dismissed it as “too expensive” and “without a strong moat”. Lesson learned, TYVM.

I wish I had been on this board in Jan/Feb. I think I would have been convinced by the arguments at that time to invest. I took advantage of the weakness this morning to buy a small amount - partially to have it in my portfolio as an ongoing reminder not to be close-minded.

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I have ZM stock since it was recommended by the Motley Fool in 2019 (thank goodness!). I told my brother and brother-in-law about it and they scoffed at the suggestion. They are huge Microsoft and Android users and thought that Microsoft Teams is a better product and would crush Zoom. They didn’t take my advice. Why did I buy ZM and not listen to them? They are “techies” and like to customize their phones and computers. They like to spend the time to look and adjust the “settings”. Most people, myself included, don’t like to waste my time doing that. It’s why I like my Apple devices and they are staunchly against Apple. I thought, “Zoom is the Apple of telecommunications.” Easy to download, easy to use, and it’s very sticky. Now, my ZM position is up 220% (even after the drop these past 2 days) and I’m DCA every paycheck and adding whenever it drops.

Mario
Long ZM

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Ak70… I relate to this… though I got in before last earnings, I still kept trading and got whiplashed… ultimately got some benefit out of the run this year… just not as much as I could if I simply held my <$70 cost holdings at the beginning of the year…

Anyways… I am glad you converted… as I look forward, it seems to me that ZM’s phone opportunity is at-least 5 times larger than its video conf opportunity… AND phone opportunity can be realized only because of its position in video conf…

Thats my belief… here is why I believe that and really invite others to critique if it does not make sense…

To my understanding, for an enterprise, Zoom sells video conferencing on a per host basis (and not per participant basis)… so in an company with 1000 employees, it is perfectly fine to use 200 host licensees (and in most cases they can get by with just 100 licensees)…

however, for phone, they need all 1000 phone numbers / connections… or at-least more than 500…

If you take an example price of $10 / host / month, ZM currently has 200x10 = $2K / months from this company…
For the phone, even if the prices is down to $5 per user, they have $5K / month opportunity with the same customer…

So I believe ZM’s phone opportunity is much larger - at-least 2x to 4x of their video opportunity.
And even with large opportunity, they would not have been able to switch customers as phone / pbx etc is very sticky and no one wants to re-evaluate in less than 5 years cycle, with pandemic and Zoom offering much lower cost, their ability to succeed is very high on a relative basis…

only caveat with phone is going to be lower gross margins… I just dont what to expect, other than that it should be lower than video conferencing business
(for reference, we all know TWLO operates with much lower margin than typical SaaS)… although I am pretty sure they will sustain high operating margin even with phone…

All in all, seems to me that Zoom has a long way to go thanks to such a close adjacency with phone in enterprise that it gives me much higher confidence of sustained high growth over next two years plus…

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What you wrote is a perfect Argument not to introduce ZOOM and then have to pay monthly fees from it. It also makes no sense to design a phone around just one app.

ZM in my opinion is one of those business that will feel a strong headwind once the tailwind from the epidemic wears of. Another risk is that it blows up for security reason as the software is partly developed in China.

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Another risk is that it blows up for security reason as the software is partly developed in China.

Citation?

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