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Why Zoom Video Stock Fell 6% on Thursday

By Daniel Sparks – Oct 29, 2020 at 2:46PM

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Are investors in the videoconferencing specialist taking profits after the stock's massive run-up this year?

What happened

Shares of Zoom Video Communications (ZM 3.01%) took a hit on Thursday, falling more than 6% as of 1:50 p.m. EDT.

The decline likely reflects the stock taking a breather after a wild run-up this year. Some other growth stocks that have crushed the market in 2020, including Fastly, Shopify, and Peloton, also fell a few percentage points or more on Thursday.

A man using Zoom to videoconference with colleagues on his computer

Image source: Zoom Video Communications.

So what

Zoom Video stock's decline adds to yesterday's pullback, bringing shares' total loss over the last two trading days to about 10%. Notably, however, the stock is still up more than 600% year to date.

Zoom has been perfectly positioned during the COVID-19 pandemic to benefit from more people working from home. One of the primary work-from-home trends has been a rise in streaming-video collaboration.

Some investors, however, may be concerned that the stock's valuation has gotten ahead of itself.

Now what

Zoom's fiscal second-quarter results blew away expectations, with revenue surging 355% year over year. Looking to fiscal Q3, management indicated that this strong momentum would continue. The company guided for third-quarter revenue of $685 million to $690 million, up from $167 million in the year-ago period.

Daniel Sparks owns shares of Fastly. The Motley Fool owns shares of and recommends Fastly, Peloton Interactive, Shopify, Shopify, and Zoom Video Communications. The Motley Fool has a disclosure policy.

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