“Pandemic darling” has become a term of disparagement on the stock market, signifying a group of stocks that rode a huge wave of consumer demand in the early weeks of the crisis in 2020 and saw their share prices surge.
Videoconferencing app Zoom was one such darling, with its revenues soaring as workforces decamped to their homes. To be fair to the company, its services are not quite as faddish as those offered by fellow pandemic darling, fitness company Peloton. The videoconferencing genie is not going back in the bottle. Employers will continue to accept the limits and irritations of virtual meetings if it means they can save money on office space.
Zoom’s problem is that it is a one-trick pony competing with much more accomplished, diversified mega-companies. Microsoft’s Teams might not have captured the consumer moment quite like Zoom, but in the bread-and-butter business market, it looks like the better bet for the long term, if only because its customers end up using it as part of a wide suite of office products.
Increased competition from Microsoft was one of the main reasons why Tyler Radke, a stock analyst at Citi, has now issued a “sell” rating on Zoom’s stock, sending its shares down more than 4 per cent on Tuesday, with further slippage on Wednesday.
Zoom is now trading more than 80 per cent below its peak share price of $589, reached in October 2020, and several analysts believe it will sink lower still, with a slowing economy also denting demand from small businesses. A clearer picture will emerge next week when it reports its latest financial results.
Microsoft, meanwhile, is the oft-overlooked bastion of Big Tech. Teams might be its fastest growing app for businesses to date, but the company, led since 2013 by Satya Nadella, has the luxury of knowing that interest in Teams could collapse tomorrow and it still has so many other irons in the fire.
