Yes, Zoom Video Communication (ZM) shares soared during the coronavirus pandemic, but what about the post-pandemic period? This is the question that those interested in Zoom trading have been asking as the focus now turns to post COVID-19 recovery. To trade Zoom stock, here is what you need to know.
A Brief History of Zoom
Zoom’s history can be traced back to 1997 when Eric Yuan, the company’s CEO and founder, came to the U.S. He commenced with WebEx Communications, which was later acquired by Cisco in 2007. This acquisition also saw Yuan promoted to Cisco’s corporate video president of engineering for collaboration software.
Yuan created Zoom Video in 2011, and its stock faced stiff competition from others such as Google and Microsoft. Zoom formed partnerships with strategic partners to boost its growth, including Slack Technologies, Box, Atlassian, and Salesforce.com. Salesforce.com invested heavily during Zoom’s IPO but later sold all its shares and reaped massive gains.
Zoom’s revenue decelerated as a public company in its first four quarters, but everything changed from April 2020 when the COVID-19 pandemic hit the globe. By July 2020, Zoom’s revenue blew the past consensus estimates.
How Does Zoom Work?
Zoom is a cloud-based conferencing software that enables people to interact virtually when a physical meeting is undesirable or impossible. Indeed, it is more than a video software because users can record meetings, create annotations, and even share each other’s screenshots. This flexibility and convenience made it the software of choice for most companies and individuals who were forced to work remotely at the height of the COVID-19 emergency.
If you are interested in Zoom trading, it is also crucial to determine how the company makes money. Users who open the basic Zoom accounts do not pay anything, but their number is limited. Also, Zoom offers three more paid packages that range from £11.99 – £15.99 per month per host.
As a package gets more expensive, Zoom reduces the limit on participants and length of meetings. Furthermore, advanced packages come with additional features, including dedicated support, recording storage, and customization options. The advanced features made the software more attractive to users, especially in 2020, and ultimately grew its revenue.
How to Go about Zoom Trading
By 2019, about half of Fortune 500 companies reportedly used Zoom. This is why it was easy for it to win more brands and individual users when COVID-19 broke out and forced more people to work remotely. After a steady rise from April 2020, Zoom stock retracted by about 8% in October, and analysts are predicting that the price might go down further.
If you are thinking of ZM stock trading, here is a demonstration of how to go about it.
· Identify a Good Broker
Like other stocks, the first step is identifying the preferred broker. Consider a well-established broker with a good trading platform.
A good broker should also have low transaction fees so that you can keep your costs low. The broker should also have an all-around trading ZM stock analysis to help you make the right decision.
Finally, ensure that the broker uses advanced system encryption to offer ample security for your personal information and deposits.
· Research Zoom and its Stock
Like with other stocks, it is important to comprehensively research Zoom and understand its performance on the market. One of the factors that a trader should check when selecting a company for investment is profitably, and Zoom has done excellently. However, you need also to establish whether the momentum can be sustained in the coming years.
In Zoom’s case, the bulk of its profits in 2020 were driven by the COVID-19 pandemic that forced people to work from home. So, the big question is, “Can Zoom sustain this momentum during the post-coronavirus period?” Consider checking expert analysis on the anticipated price shifts to make your trading decisions.
· Evaluate How Zoom Stock Fits in Your Trading Portfolio
If you still want to trade Zoom after doing a comprehensive analysis, it is important to think of how Zoom stock will slot in your portfolio. Mainly, you need to check how diversified your portfolio is and the impact of adding a new asset. The rule of thumb is to reduce the risk and exposure by spreading money in different industries, companies, and geographies.
Try to answer the following questions to help you make the right decision on the diversification of your portfolio.
1. Will buying ZM stocks take you too deep into the tech industry?
2. Will it tip your portfolio too far into stocks?
· Select the Preferred Trading Strategy
Before you can place your first trade, it is paramount to identify the preferred strategy. For example, do you prefer fundamental or technical trading strategies?
Technical trading involves using indicators such as Bollinger bands and moving averages to identify points of support, resistance, and trends in the price of the selected stock. However, the fundamental analysis relies on events, such as the release of data on employment and how it is likely to impact the stock of interest.
Since no trading strategy is perfect, you should always use an appropriate risk management strategy, such as a stop-loss order. This will help to minimize losses if the market goes against your prediction.
Zoom is a relatively new firm that has consistently grown its revenue within a short time. Its rise, especially in 2020, was driven by the Coronavirus pandemic, and now investors are expecting Zoom stock price to fluctuate in the future. However, Zoom’s good management and preference by top brands imply that it is likely to remain profitable and could be a new force in the tech industry.
To succeed in Zoom trading, it is prudent to follow its performance and the latest analysis by experts closely. Because of the anticipated high volatility, make sure to manage your risk well by only trading with a small portion of your equity in every trade and using stop-loss orders correctly.