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Why Zoom Video Communications Stock Jumped Today

By Evan Niu, CFA – Feb 3, 2020 at 12:51PM

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Rival platform Microsoft Teams experienced a brief outage. Also, Zoom set its next earnings date.

What happened

Shares of Zoom Video Communications (ZM 1.43%) have jumped today, up by 11% as of 12:15 p.m. EST, after rival enterprise collaboration platform Microsoft Teams suffered a widespread outage. Zoom separately also announced that it would release fourth-quarter earnings results on March 4.

So what

Microsoft Teams went down earlier in this morning after the software giant reportedly forgot to renew a security certificate that is necessary to connect to Microsoft's servers. Such a relatively simple mistake is rather embarrassing for one of the largest tech companies in the world, but Microsoft was able to quickly deploy a fix and restore service to Teams, which competes with Zoom's online videoconferencing and collaboration platform.

Green stock chart going up

Image source: Getty Images.

Now what

In other news, Zoom also disclosed a couple of insider transactions on Friday. CEO Eric Yuan converted and donated 50,000 shares to a charitable donor-advised fund, while director Peter Gassner received nearly 500 shares after part of a restricted stock unit award vested, according to regulatory filings. Neither transaction was particularly significant.

Investors are clearly looking forward to Zoom's fourth-quarter earnings report. The company had crushed its own forecast in the third quarter and raised its full-year guidance, but shares still fell following the results. The market may be realizing that the sell-off was an overreaction. Guidance for the fourth quarter calls for revenue of $175 million to $176 million, which should bring full-year revenue to $609 million to $610 million.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and Zoom Video Communications and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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