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Why Zoom Stock Surged 13.75% Today

By Joe Tenebruso – Jun 1, 2020 at 6:34PM

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The video call leader is implementing a new growth strategy.

What happened

Shares of Zoom Video Communications (ZM -0.12%) climbed by nearly 14% on Monday. The video conferencing company released some sought-after software updates, and investors are looking forward to its upcoming earnings results. 

So what

Zoom rolled out a security update over the weekend that will provide stronger encryption for video calls to its paying customers. While some organizations, such as schools, will also receive these security features, most non-paying users will not. 

The strategy could drive more free users to upgrade their accounts. That, in turn, could help to fuel Zoom's already impressive sales growth. The technology company's revenue soared 88% to $622.7 million in fiscal 2020, which ended on Jan. 31. 

A compass pointing towards the word growth.

Zoom Video Communications' stock rose sharply on Monday, as investors grew more optimistic about the video call star's revenue growth prospects. Image source: Getty Images.

Now what

Encryption is a delicate topic. Privacy concerns must be balanced with the need to avoid enabling criminal conduct, and regulators are sure to weigh in at some point. Unsurprisingly, Zoom security consultant Alex Stamos said in an interview with Reuters that the plan was subject to change. 

Zoom's leadership team will likely speak more about its new strategy during its upcoming earnings conference call. The company is scheduled to release its fiscal 2021 first quarter results after the market close on Tuesday, June 2. Its earnings call is scheduled for 5:30 p.m. EDT that same day. 

Joe Tenebruso 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 August 2020 $130 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

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