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Why Zoom Video Communications Stock Fell Today

By Evan Niu, CFA - Apr 7, 2020 at 11:47AM

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Taiwan becomes the first government to ban Zoom as security concerns continue to mount.

What happened

Shares of Zoom Video Communications (ZM 3.39%) have fallen today, down by 5% as of noon EDT, amid ongoing scrutiny of the videoconferencing platform's security. Taiwan has become the latest to stop using Zoom due to those concerns.

So what

The Taiwanese government has instructed its agencies not to use Zoom, according to Reuters. Government agencies should instead use other tech platforms that are more secure for videoconferencing. Taiwan is the first government to officially warn against using Zoom.

People in a Zoom video conference

Image source: Zoom Video.

The news comes just a few days after various school districts around the U.S. have similarly started banning Zoom due to security concerns. Many schools are turning to remote learning in the face of the COVID-19 pandemic. Elon Musk's rocket company, SpaceX, had previously banned Zoom as a result of "significant privacy and security concerns."

Now what

A cybersecurity research firm also discovered that compromised Zoom accounts are being distributed on the dark web, according to Yahoo! Finance. Internet trolls expressed interest in "Zoombombing" the video conferences, but internal company meetings could potentially include sensitive information.

While Zoom grapples with security, competition is heating up and analysts are becoming increasingly skeptical about the stock's valuation following its astronomical rally this year. Earlier this week, Credit Suisse downgraded Zoom shares due to their valuation, which suggests that investors are expecting extremely strong conversion of free users to paid customers.

Meanwhile, Zoom is also facing a slew of class action lawsuits.

Evan Niu, CFA 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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Stocks Mentioned

Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$113.23 (3.39%) $3.71

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