What happened

Shares of Zoom Video Communications (ZM -0.34%) slumped on Tuesday, falling as much as 8.3%. At 10:29 a.m. ET, the stock was still down 7.9%.

The catalyst that sent the teleconferencing stock lower was negative analyst commentary that painted a pretty bleak picture.

So what

Citi analyst Tyler Radke downgraded Zoom Video Communications stock to sell from neutral (hold), while assigning a $91 price target, according to The Fly. This suggests that even though that stock has already fallen roughly 70% over the past year, it could still shed another 20% from Monday's closing price.  

Radke detailed a number of factors that he believes will be hurdles for the videoconferencing specialist. Ongoing macroeconomic weakness and uncertainty is taking a toll on small- and medium-size businesses (SMBs), a prime growth area for Zoom. He believes the current landscape will result in increasing churn among SMBs and other online users, which will make future growth more difficult.

He also cited increasing competition from Microsoft Teams, which goes head-to-head with Zoom in the digital meeting space.

Radke believes this one-two punch will more than offset any market share gains from new products, resulting in ongoing pressure on Zoom's results.

Now what

It's important to note that most of Radke's commentary addresses what could happen over the short term. The current economic uncertainty is a challenge to many businesses, not just Zoom. Those challenges will eventually lift, leaving Zoom in a strong position to continue its growth. Furthermore, Microsoft Teams has long been a rival, and that didn't stop Zoom from gaining significant ground and stealing market share, particularly at the start of the pandemic.

Zoom surprised detractors and investors alike when the company reported its fiscal 2023 first-quarter results in May and they were much stronger than expected. Revenue of $1.1 billion grew 12% year over year. While its profits dipped, the company continued to invest heavily in research and development, which should bode well for future product creation and improvement. At the same time, Zoom improved its free cash flow, which suggests the hit in profits was the result of non-cash items, including depreciation. 

While challenges remain, for investors firmly rooted in the long term, Zoom Video Communication is still the industry leader, and its stock remains a buy.