ZM in 15 years

In a post yesterday “Our stocks that will get through this the best” by GauchoChris, I responded with this: https://discussion.fool.com/i-agree-with-most-everything-that39s…

I mentioned ZM, TDOC, MA, V, and FSLY. Saul replied to the following passage that I wrote at the end of my post, which I self-reported to be OT:

I’m torn on whether to buy more of my favorite stocks that are down (e.g., AYX, DDOG, OTKA), or more ZM, which is up 67% over the last 3 months, but I really feel like is the beginning of something big. No doubt that some of the potential growth due to COVID-19 is already baked into the share price of ZM and TDOC…but how much? Is ZM at $110 really better than AYX at $95? I’m sure others are wondering the same thing.

with (the bolding is mine)

Hi Matt,
That seems very focussed on the stocks, and not OT at all. You mentioned ZM being at “the beginning of something big.” Do you want to tell us what you are thinking about?
Saul

This post is to answer the bolded question above. The original thread had several intertwining discussions that were being replied to, so I thought I’d start a new thread to elaborate on what I was thinking about. Zoom reminds me in certain ways of the early days of companies that have not only disrupted their industries, but spread their tentacles all throughout related industries. Caveat: Much of this is just a hunch, and not quantitative. But let’s go back and revisit four such stories: Google, Amazon, Netflix, and Facebook.

In the 1990s, search engines started popping up. There was Altavista, Lycos, WebCrawler, Excite, Yahoo, etc. They were okay, but nothing really caught on. Then Google hit the scene and did everything better. They became the de-facto search engine, but they weren’t done there. They’re now so much more than just a search engine. They’re the leader in email, maps, videos (YouTube), and advertising is the driving force behind this. There’s Google voice, books, scholar, translate, flights, photos. Does anyone use a TomTom anymore? They’re investing in self-driverless cars. Google’s tentacles have reached all over the internet and beyond. They’ve entered in our daily parlance: “I’ll just Google it”.

Also in the 1990s, online stores and businesses starting popping up. You all know the story. Amazon started with books and moved out into more products, and while many other online stores exist, Amazon is the clear leader of the space. But then they launched AWS, and become so much more than just an online store. They branched out to make Alexa, Kindle, Amazon Prime video, Amazon Music, and more. They’ve revolutionized the shipping industry. They have tentacles spreading all over the place. It’s also in our parlance: “I’ll just get it on Amazon”. Even if you end up getting it from a Shopify store.

In the late 1990s, Netflix launched as an alternative to video rental stores like Blockbuster. Eventually they moved to offering streaming movies. Next, they started making TV shows and movies, with hits like House of Cards, Stranger Things, and Bird Box. Their tentacles have spread out and are now competing with Hollywood and cinemas, and many suspect that it’s just a matter of time before they leverage advertising. It’s also in our common parlance. “Netflix and chill”. Even if it you’re watching The Good Place on Hulu.

In the early 2000s, there were various social media sites. SixDegrees, LiveJournal, Friendster, MySpace (btw, for amusement, take a listen to the Reply All podcast on how LiveJournal got bought by Russia). Then Facebook came along and did everything better. But soon they become so much more than just a basic personal social media site. There are “like” buttons all over the internet. They leverage our personal data for targeted advertising. They bought Instagram and WhatsApp, which is now being used by companies and not just individuals. They are now investing in cryptocurrency, AI, and who knows what else. It’s now in our common parlance: “That post got tons of Likes…I saw on my timeline or newsfeed…find me on Facebook, etc.”.

In the 2000s, online video and collaboration tools became popular. Skype was started in Estonia. Adobe made AdobeConnect (still terrible), Google came out with Hangouts. Apple has FaceTime. There were others whose names I don’t even remember. But nothing really caught on universally, in personal and the business world. Some had these features where the speaker’s video would get larger in a group chat, but it never worked well, and it would get confused when someone coughed. Then Zoom came along and did everything better. Everyone now is realizing that they’re doing the same things that Google, Amazon, Netflix, Facebook did to their respective industries. In a few years, I suspect that Zoom will be in our common parlance, in work, schools, etc. And like those last four, I don’t think they’ll stop there. Zoom will spread its tentacles all over industries that utilize communication, which is so many. Remember last summer when Saul reported how they were partnering with Verizon? 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? Health care and telemedicine. Video games. Self-driving cars. Self-driving big rigs. Internet of Things. Security cameras. Dash cams. Amazon delivery cams. Online dating. Online test proctoring. Professional sports. So many more that I’m not even thinking of.

Of course, maybe this won’t happen. But even in that case, Zoom is a stock worth owning for their growth rate alone, at least for a few years until the “story changes”. I don’t know what the vision of management will be. Maybe they’ll get bought by Google or Facebook. 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. Of course, this is more based on my own personal experience and observations than analytics, so I could be completely wrong. I work in higher ed, and have dealt with subpar tools for years, and I feel like I’m finally seeing the writing on the wall. There are bells being rung with Zoom in education that can’t be un-rung. The upside seems good enough, and the risk minimal enough, that they’re worth investing in. It’s still not even universally known. I spoke with several people this past week who had never even heard of Zoom.

Addendum: I said that my last question in yesterday’s post was OT because it felt like portfolio management. When to buy a stock like AYX or DDOG after falling 40%, vs. ZM after it has risen 25%. But if the moderators think it’s fair game, that’s fine with me. I don’t post much at all here (but I read almost everything, and am so grateful to all of you for what you do – thank you!!!), so I’m just trying to be very mindful about what I post and discussions I engage in, because so many get out of hand.

Along these lines, it may seem silly to even ask: why buy ZM at a premium when AYX is at such a ridiculous discount? That’s something I just can’t answer. Just for fun, take a look at the following, which was a snapshot of my portfolio holdings from earlier today:


       Today     1 month
AYX   -16.40%    -41.70%
CRWD  -15.31%    -49.45%
DDOG  -14.75%    -34.39%
FSLY  -16.00%    -48.37%
MDB   -14.69%    -42.61%
OKTA   -9.64%    -28.40%
ROKU  -12.59%    -52.61%
TDOC   -8.36%     +4.14%
TTD   -16.52%    -45.93%
TWLO   -6.33%    -42.34%
WORK   -5.62%    -31.56%
ZM     +6.83%    +26.35%

See any outliers?

66 Likes

I agree that Zoom is at the beginning of something big and set to be the “Kinkos” or “Xerox” of video conferencing.
Here are a couple anecdotal examples:
My daughter at UCSD is taking all her finals via Zoom. Spring quarter classes will be remote via Zoom. My middle and high schooler are home for a month and will begin classes this Wednesday via Zoom. I teach a class at Cal Poly. My students took their final today via Zoom. As I’m typing this, the university just announced spring classes will be conducted online.

My wife works for a national media company. They implemented Zoom nationwide today.

The platform is very easy to use. When the pandemic winds down, in my opinion, businesses and people will continue utilizing Zoom.

With kind regards.
JT

13 Likes

An example of Zoom expanding market share into new things; docs are now using zoom for consults touting its waiting room features:
https://twitter.com/YoniFreedhoff/status/1239911758510411777…

1 Like

Speaking of which I don’t recall much discussion of Zoom being used for telemedicine. Do they ever break out numbers for adoption of this specific feature? Would also be interesting to compare features of their product vs rival telemedicine products. Any docs here practicing telemedicine using zoom? https://zoom.us/healthcare

You mentioned ZM being at “the beginning of something big.” Do you want to tell us what you are thinking about?

Hi matt, thanks so much for that wonderful response! that clearly took a lot of thought putting it all together. It was much appreciated.
Saul

5 Likes

Along these lines, it may seem silly to even ask: why buy ZM at a premium when AYX is at such a ridiculous discount? That’s something I just can’t answer. Just for fun, take a look at the following, which was a snapshot of my portfolio holdings from earlier today:

For my part I thought the post was ON Topic and the question posed is crucial. In view of changing public perceptions vis a vis ZM do we have a strong rationale for buying it at a premium…something I have avoided doing, Or does the world expect reversion to status quo ante.