Depending on where you got into Zoom Stock, you might be sitting a mountain of profits or a mountain of losses. But if you have been on the sidelines this whole time, you are in the right place. As of this writing, Zoom Video Communications Inc. is trading around $360 per share, down from $589. But is it a good time to buy in after that magnitude of a meteoric rise? Are you just “buying the dip” for a future rally to new highs? Or would it be better to just light your money on fire instead? Below we perform technical analysis and the strategic outlook for the company. Let us answer: Is Zoom Stock Still A Good Investment?
What is Zoom Video Communications?
Before we can make a prediction on the stock, we have to define what the company does.
According to the company website:
Zoom helps businesses and organizations bring their teams together in a frictionless environment to get more done. Our easy, reliable cloud platform for video, voice, content sharing, and chat runs across mobile devices, desktops, telephones, and room systems. Zoom is publicly traded on Nasdaq (ZM) and headquartered in San Jose, California.
Essentially Zoom Video Communications provides a full suite of online video and chat tools for individuals and businesses.
You probably have already heard of Zoom, considering they rapidly dominated the videoconferencing space as a result of the COVID19 lockdowns.
It can be argued that the widespread utilization of the company’s videoconferencing services is the reason for the exponential rise in the stock.
People tend to invest in what they see and know. For example, millions of people use Shopify, which explains its unbelievable run the past couple of years.
Zoom Stock is no different.
Onto the technicals!
Zoom Technical Analysis
Currently, Zoom Stock is trading around $360/share, where investors are valuing this company at $103 Billion. This is down significantly from its all time high around November of $589. However, it is still significantly higher than its all time low of $60.
See chart below, courtesy of TradingView:
- Congratulations if you had the foresight to buy and hold the stock, even this far!
- Uh oh…
While the chart looks pretty strong overall, it has lost some very important technical levels.
These include the 20, 50 and 63 day moving averages. In the majority of cases, stocks that lose these important moving averages, tend to continue lower.
In Zoom’s case, there is only one more important moving average left…the 200 day moving average.
Will it break or hold?
Zoom Stock Prediction
Based on our technical analysis, the outlook for Zoom stock is not great.
Our prediction is that there is an overwhelming likelihood that the stock will continue down its downward slope.
Our first Zoom prediction is that the stock will pierce the 200 day moving average of $304. Most likely, this can go all the way down to $300 and a little below.
Not only is the chart pattern pretty bearish, we have factored in the fact that the exuberance that drove the stock to $589 is not really there anymore.
We believe this for a few reasons.
- Zoom’s videoconferencing software is not great
- The company can really only do one thing to raise revenue now: raise prices on new and existing customers
- There are multiple alternatives to Zoom
For these reasons, we believe it is very unlikely that the stock has much long term appeal, and investors are, or will be soon, aware of that fact.
You can video conference on Google Meet, Uberconference, Skype, iPhone and other services. Particularly individuals, which can almost entirely use multiple videoconferencing services for free.
Can Zoom just keep raising prices without losing customers to competitors? Doubtful.
We believe this stock will probably get a nice rip if it reaches below the 200 day moving average, which can be worthy of a trade.
But, in the long run, we do not see this as continuing to make new highs for the foreseeable future.
Are we dead wrong on our Zoom Stock Prediction? Tell us in the comments!
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