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Why Zoom Video Communications Shares Rose 41% Last Month

By Anders Bylund – Jul 6, 2020 at 11:26AM

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The leading provider of video call tools posted strong results and upgraded its data security.

What happened

Shares of Zoom Video Communications (ZM 9.85%) gained 41.3% in June 2020, according to data from S&P Global Market Intelligence. The video conference specialist sprinted out of the gate with an important technology upgrade and a strong earnings report.

So what

Zoom introduced end-to-end encryption of video calls for paying customers on June 1. Share prices rushed 14% higher that day as investors and users embraced the long-awaited security improvement.

That evening's first-quarter report crushed analyst expectations across the board and drove a 9.7% price increase over the next two days.

The stock continued to climb throughout June as the coronavirus pandemic accelerated. Zoom would benefit if the health crisis forces another round of stay-at-home orders, as workers would lean into video calls to get their jobs done and consumers would use Zoom's platform to connect with friends and family at a distance.

Point-of-view shot of a person attending a video call through a tablet computer.

Image source: Getty Images.

Now what

Zoom's stock has quadrupled in 2020, driven by the COVID-19 effects mentioned above. CEO Eric Yuan isn't just coasting on the work-from-home windfall but building a stable business platform for the long-term future. For example, strong end-to-end encryption was quickly extended to free users as well as paying ones when consumers, technology experts, and lawmakers made it clear that Zoom calls should be secure whether you pay for the service or not.

Anders Bylund 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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