Zoom To Doom

Shares of Zoom Video Communications Inc have tumbled about 90% from their pandemic peak in October 2020 as the former investor darling struggles to adjust to a post-COVID world. The stock was down nearly 10% on Tuesday after the company cut its annual sales forecast and posted its slowest quarterly growth, prompting at least six brokerages to cut their price targets.

The company, which became a household name during lockdowns due to the popularity of its video-conferencing tools, is trying to reinvent itself by focusing on businesses, with products such as cloud-calling service Zoom Phone and conference-hosting offering Zoom Rooms.

Any turnaround in the business is still a few quarters away as growth in its mainstay online unit slows and competition from Microsoft Corp’s Teams and Cisco’s Webex and Salesforce’s Slack gets intense.

Zoom needed to spend heavily to keep hold of market share. Spending to cling onto, rather than grow, market share is never a good place to be and was a sign of trouble ahead. The company’s operating expenses surged 56% in the third quarter as it spent more on product development and marketing. Its adjusted operating margin shrank to 34.6% from 39.1% a year earlier.