Please ensure Javascript is enabled for purposes of website accessibility

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

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zoom Video Communications Stock Quote
Zoom Video Communications
$74.45 (-0.12%) $0.09
Alphabet Inc. Stock Quote
Alphabet Inc.
$98.74 (-1.40%) $-1.40
Alphabet Inc. Stock Quote
Alphabet Inc.
$99.17 (-1.39%) $-1.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.