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Why Zoom Video Stock Was Surging Today

By Jeremy Bowman – Apr 23, 2020 at 3:45PM

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Shares of the videoconferencing specialist jumped as its user base continued to grow.

What happened

Zoom Video Communications (ZM 0.48%), the high-flying videoconferencing specialist that's been a winner in the "stay-at-home" economy, was surging again today after it reached another milestone in its user growth. Shares of the tech stock jumped to an all-time high, as Zoom said in a blog post that it reached 300 million daily meeting participants, up from 200 million at the beginning of April and just 10 million before the pandemic. 

That news lifted the stock 12% as of 2:48 p.m. EDT.

A man having a videoconference on his computer

Image source: Getty Images.

So what

Zoom has experienced skyrocketing growth during the pandemic as it's been the preferred videoconferencing tool for a wide range of customers, including people, companies, and schools now operating on a work-from-home basis. That growth hasn't come without controversy; some have criticized Zoom for security vulnerability, and a number organizations have sworn off its tools.

However, the company has committed to improving its security protocols and also gave an update on its 90-day security plan, saying it would release a new version of its software this weekend, Zoom 5.0, that would contain two new features to enhance security. First, it would enable AES 256-bit GCM encryption, which will improve meeting protection and add resistance to tampering. Second, users will be able to easily report any security violations to Zoom's Trust & Safety team. 

The growth in daily users shows that Zoom's adoption has continued in spite of security concerns, and the 5.0 version should help assuage its critics.

Now what

It's unclear how this surge in users is impacting Zoom's financials, as it's given away some of its tools to educators and other such groups, so the company may not see as strong of a jump in revenue and profits as some might expect. 

However, there's no question that the COVID-19 crisis has been a boon for the company's visibility and adoption, and there's a good chance that some of those users will stick around long term. At this point, the biggest question around Zoom is what its business will look like after the crisis.

Jeremy Bowman 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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