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Why Zoom Video's Share Price Soared 39% in March

By Royston Yang - Apr 3, 2020 at 9:42AM

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More and more businesses are using the company's cloud-based platform to work from home.

What happened

Shares of Zoom Video (ZM -3.57%) soared 39% in March, according to data provided by S&P Global Market Intelligence.

The company's stock has more than doubled this year alone and is poised to be one of the few growth stocks during this COVID-19 pandemic.

Man wearing headphones and waving to lady on monitor

Image source: Getty Images.

So what

Many businesses have now allowed employees to work from home if possible, to limit the spread of the virus. The trend toward remote communications had already begun a few years back, but this shift has now accelerated with the rapid spread of the novel coronavirus.

Investors are betting that Zoom will be able to sign up new clients at a record pace, as companies are now forced by circumstances and legislation to allow employees to work from home. Zoom's cloud-based software offers seamless connections, teleconferencing, and videoconferencing, and is ideal for conducting meetings.

The company is also providing its videoconferencing tools to K-12 schools for free to use as schools across the U.S. shut down. Home-based learning is being adopted in place of physical classroom teaching, and Zoom's software plugs this gap nicely by connecting teachers to students.

Now what

At the end of the fiscal year 2020, Zoom reported approximately 81,900 customers with more than 10 users. This was up 61% year over year and demonstrates the strong growth for the company's services.

Even after the pandemic subsides, businesses and schools who have signed on with Zoom may continue to use its services. With the convenience and efficiency offered by Zoom's cloud-based platform and videoconferencing tools, workplaces and schools may witness a structural change in the way they adopt this technology.

There is a very high chance that this structural change is here to stay, and will alter the way businesses and individuals communicate in years to come.

Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications and recommends the following options: short May 2020 $120 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

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$99.50 (-3.57%) $-3.68

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