ZM

What is Zoom and what do they do?

If you haven't heard of Zoom, it's safe to assume you don't work in an office. Zoom Video Communications, Inc. is a cloud-based communications platform provider. And when the Covid-19 pandemic made people work from home across the globe, Zoom emerged as one of the top solutions for video conferencing.

The company creates products that facilitate user interactions via video, audio, messages or digital content sharing via desktops, laptops, mobile devices, telephones, and conference room systems.

In their own words, Zoom’s mission is to make “communications frictionless and secure. Zoom enables users to connect to others, share ideas, make plans, and build toward a future limited only by their imagination.”

Headquartered in San Jose, California, Zoom was founded in 2011 by CEO Eric Yuan who previously worked at Cisco Systems as President of Engineering. 

Over half a million businesses currently use Zoom as a communications tool, including 70% of the Fortune 100 and over half of Fortune 500 companies.

How does ZM make money?

Zoom operates on a freemium business model by offering basic or limited features to users free of charge. The company only earns revenue when users decide they need more advanced features and agree to a subscription.

Zoom’s revenue is entirely reported in one operating segment which includes earnings from all of its products and services.

Some of the company’s leading products include Zoom Meetings, a device agnostic video conferencing and messaging tool, Zoom Rooms which brings “HD video collaboration into any space”, Zoom Phone, an enterprise cloud phone system, and Zoom Chat which allows users to share messages and digital content across a variety of devices.

In addition to product subscriptions, Zoom also earns revenue by providing consulting services and hosting special online events.

Is Zoom a profitable company?

Zoom is a profitable company indeed. 

Zoom’s net income was already growing at a steady clip prior to the arrival of Covid-19, but the pandemic saw its net income leap from US$25m to US$672m to US$1.3b in FY2019, FY2020 and FY2021 respectively.

Zoom’s free cash flow currently sits at US$1.46b.

Is ZM stock a buy?

Many investors see Zoom as one of Covid-19’s biggest beneficiaries. Between April and October 2020, the Zoom share price skyrocketed almost 350% from a little over US$120 to a high of over US$550.

But as the effects of Covid-19 have slowly dissipated around the world, the ZM stock price has gradually fallen by almost 80% to a low of under US$100 (March 2022).

Some investors see the company’s financial performance as a sign to hold onto the stock while others believe Zoom’s dominance will fade going into the future.

Who owns the most ZM stock?

Even after transferring US$6b worth of ZM shares to unspecified beneficiaries at the beginning of March 2022, CEO Eric Yuan still owns the biggest piece of Zoom’s pie, holding 7.53% of the business.

Zoom’s other top shareholders include T. Rowe Price Group (6.16%), Vanguard Group (4.38%), Morgan Stanley Investment Management (3.73%), BlackRock (3.47%) and Hong Kong’s richest man, Li Ka-Shing (3.3%).