Why Zoom Video Stock Fell on Monday

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© Provided by The Motley Fool Why Zoom Video Stock Fell on Monday

What happened

Shares of Zoom Video Communications (NASDAQ: ZM) fell sharply on Monday, along with the stocks of many other high-flying work-from-home companies. The provider of a video collaboration platform saw its shares fall more than 7% at one point in the trading day. As of 11:45 p.m. EST today, however, the loss had been trimmed to 3.7%.

The stock’s decline was likely driven primarily by news that Moderna‘s coronavirus vaccine was found to be about 95% effective in a clinical trial with more than 30,000 volunteers. Zoom stock’s sell-off suggests some investors think shares could take a hit when effective vaccines are distributed, helping the U.S. and other countries return to more normalcy.

© Zoom Video Communications A man using Zoom to videoconference with colleagues on his computer

So what

Monday’s sell-off in work-from-home growth stocks like Zoom is reminiscent of a sharp decline in these stocks last week, when Pfizer and BioNTech announced similar success in human trials with their jointly developed COVID-19 vaccine.

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Zoom has seen a significant acceleration in its top- and bottom-line growth as people all around the world turn to its video collaboration software to work virtually as they shelter at home. Fiscal second-quarter revenue climbed 355% year over year as net income per share for the period came in at $186 million, up from $5.5 million in the year-ago period. 

Now what

Investors will look to Zoom’s upcoming fiscal third-quarter report on Nov. 30 to see whether this momentum continued during the period. Based on management’s guidance for revenue between $685 million to $690 million during the period, it likely did. 

But what investors may be more interested in is how growth will pan out in 2021 when the tech company is up against incredibly tough comparisons.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool has a disclosure policy.

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