UK markets open in 7 hours 2 minutes
  • NIKKEI 225

    +15.12 (+0.05%)

    +842.94 (+4.51%)

    +0.44 (+0.57%)

    +1.30 (+0.07%)
  • DOW

    -482.78 (-1.40%)

    -216.12 (-1.53%)
  • CMC Crypto 200

    -8.74 (-2.13%)
  • ^IXIC

    -221.56 (-1.93%)
  • ^FTAS

    +4.40 (+0.11%)

Zoom shares down 90% from peak as pandemic boom fades

A 3D printed Zoom logo

By Aditya Soni and Chavi Mehta

(Reuters) - 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.

Analysts, however, say 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.

GRAPHIC: Zoom's revenue growth slows to a crawl -

"Zoom has a fundamental flaw - it has 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," Hargreaves Lansdown equity analyst Sophie Lund-Yates said.

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.

Some brokerages believe acquisitions could help revive growth at Zoom, but Chief Executive Eric Yuan said on a post-earnings call that he continued to see heightened deal scrutiny for new business.

"The game is not over for them but without acquisitions this is a multi-year path to returning to higher growth," Needham & Co analyst Ryan Koontz said.

GRAPHIC: Zoom shares tumble as pandemic boom wanes, competition rises -

(Reporting by Chavi Mehta and Aditya Soni in Bengaluru; Editing by Anil D'Silva)