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Why Zoom Video Communications Stock Pulled Back Today

By Jon Quast - Dec 23, 2020 at 12:57PM

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Investors fear for the company's future, but the company has big behind-the-scenes plans.

What happened

Shares of Zoom Video Communications (ZM 5.61%) pulled back on Wednesday along with some other popular work-from-home stocks. These enjoyed a good run in early 2020 due to unprecedented growth, but investors aren't sure if these gains will hold out in the new year. As of 12:45 p.m. EST, Zoom stock is down almost 6%. However, as Wall Street wonders about the company's future, Zoom clearly isn't resting on its laurels, as a news report today demonstrates.

So what

According to digital news site The Information, Zoom is looking to disrupt business emails just like it disrupted business meetings. When the company filed to go public, it talked about how its video platform was just one part of the overall communications and collaboration market. By experimenting with email, and reportedly also with calendar software, Zoom appears to be setting its sights on expanding its focus to the entire communications and collaboration market it operates in.

A rising red arrow breaks near the top, resulting in the tip of the arrow pointing down.

Image source: Getty Images.

Before you get too hyped up, consider that Zoom is reportedly still in the very early stages of product development. However it might not take too long to start hearing the company's plans. Trials with select customers could start as early as next year.

Now what

I can certainly appreciate any apprehension investors have with Zoom stock. It's already returned so much -- up almost 500% in 2020. And it trades at a nosebleed price-to-sales ratio of 56. However, while there's nothing wrong with questioning future returns for Zoom, investors should make sure they aren't too quick to entirely dismiss the prospects of top companies. 

As this news from Zoom demonstrates, winning businesses have a knack for expanding their market opportunity when investors expect it least. Zoom has been a huge winner in 2020 in part due to a relentless focus on customer service. Now armed with its windfall pandemic profits, it's well capitalized as it prepares for its second act. 

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Zoom Video Communications Stock Quote
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ZM
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