How does Zoom make money?

A basic Zoom account is free and allows video meetings for a limited number of participants for a limited time. Following this, Zoom offers three additional packages ranging from $14.99 - $19.99* per month per host. As packages get more expensive, they reduce limits on participant numbers and meeting lengths. They also come with additional features such as cloud recording storage, dedicated support and customisation options. However, as packages get more expensive, they also require a minimum number of ‘hosts’ per package.

‘Zoom rooms’ is Zoom’s video conferencing package. Here Zoom makes a clear distinction between meeting packages and conferencing packages. A room in currently $49.00 per month per room, and works as an ideal solution for larger companies who regularly host conferences.

For example, a multinational enterprise (MNE) that wishes to sign up to zoom may choose their enterprise package, starting at $14.99 per month for a minimum of 100 hosts - resulting in a total minimum cost of $1,499 per month.

Zoom’s stock price history

With around half of Fortune 500 companies reportedly using Zoom in 2019, it’s no surprise that Zoom’s stock price has risen drastically since the outbreak of coronavirus. The virus has caused many to work remotely, creating a larger demand for conferencing tools that enable workers and teams to keep in touch and continue collaborating.

Zoom’s IPO and stock price in 2019

Zoom video communication’s stock made its debut on the NASDAQ under the ticker ‘ZM’ on Thursday the 18th of April 2019. Zoom announced their stock would be priced at anywhere between $32.00 and $35.00. Once the stock was publicly available, the price quickly surged over 80% to $65, before ending its first day of trading at around $62.

Following Zoom’s IPO, it reached highs of $107.34 on June the 20th before price momentum slowed down and the price gradually fell over the next months, closing at $68.04 on the last trading day of 2019.

Zoom’s stock price in 2020

Zoom stock price opened at $68.80 on the first trading day of 2020. However, following the coronavirus news and surrounding pandemic, Zoom’s stock found a new high of $181.50 on April the 24th. Since the start of the year Zoom’s stock has been on a bull run and could continue if many continue to work from home.

Is Zoom stock a good buy?

Demand for collaboration tools, such as Zoom has hit a new high following the coronavirus pandemic. Most company’s employees are working from home and there is limited contact between businesses dealing with one another. A combination of these factors and the likelihood of social distancing lasting throughout 2020 could boost Zoom’s revenue accordingly.

Many analysts predict that Zoom could grow its annual revenue to around the $1bn mark by 2021, a significant increase from the $662m in 2019. Besides the spike of users from coronavirus, many companies are becoming more remote. This ‘remote working revolution’ will require effective video conferencing software, such as Zoom to contribute to the revolution.

Zoom is currently trading at an overvalued rate, with its 12-month-trailing P/E ratio approximately 444x times its EPS. However, if the company keeps building upon its financial results and gains market share in the video conferencing industry, it could result in a promising future for the relatively new company.