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Why Zoom Stock Jumped on Wednesday and Then Retraced Much of Its Gain

By Daniel Sparks – Apr 8, 2020 at 3:40PM

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Just as investors were applauding Zoom's reinvigorated security efforts, Google rained on the videoconferencing company's parade.

What happened

Shares of videoconferencing platform Zoom Video Communications (ZM -0.12%) initially surged on Wednesday. The stock rose as much as 10.7%. But shares gave up much of that gain late in the trading day, closing 3.6% higher, about in line with the S&P 500's rise on Wednesday.

Investors seemed pleased with the tech company's plans to improve privacy, following reports that hackers have been interrupting some Zoom video sessions. But some investors were spooked on Wednesday afternoon when BuzzFeed reported that Alphabet's Google had banned the video conferencing platform from its employees' devices.

A group of business people videoconferencing.

Image source: Getty Images.

So what

On Wednesday, Zoom launched a 90-day play to bolster privacy and security initiatives. The plan includes the creation of a chief information-security officer council and advisory board to open up a dialogue about privacy, security, and technology challenges for its platform.

"This group will enable me to be a more effective and thoughtful leader and will help ensure that privacy and security are at the forefront of everything we do at Zoom," said CEO Eric Yuan in a press release on Wednesday.

But news that Google had banned the Zoom app from its employees' devices reinvigorated privacy concerns. The app did not meet the company's security standards, a Google spokesperson told BuzzFeed.

Now what

Over the next 90 days, Zoom and third-party experts will be conducting "a comprehensive security review," the company said on Wednesday. This third-party platform notably includes Alex Stamos, a highly respected authority on cybersecurity.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and 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
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$74.45 (-0.12%) $0.09
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Alphabet Inc. Stock Quote
Alphabet Inc.
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$99.17 (-1.39%) $-1.40

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