Avoid These 3 Tech Stocks In January: Zoom Video, SolarWinds, And Sabre

: ZM | Zoom Video Communications, Inc. -  News, Ratings, and Charts

The technology sector has been one of the biggest beneficiaries of business, work, and lifestyle changes caused by the COVID-19 pandemic. With the continued spread of the virus and the recent identification of a new, more contagious, strain, society is depending increasingly on technological solutions to lockdown limitations.

In fact, many industry experts believe that the demand for technology solutions will not decrease even in a post-pandemic world because it would not make sense for individuals and businesses to discard the new efficiencies technology has created. However, not every technology company is expected to do well in the coming months.

Some companies have either hit a growth ceiling or are being plagued by lawsuits or other bad news. These stocks have been facing price declines for some time and there appears to be no ready catalyst to help them recover in the near term.

Zoom Video Communications (ZM), SolarWinds Corporation (SWI), and Sabre Corporation (SABR) are three companies that have unique problems. And, in the absence of near-term upside potential, we believe it is wise to avoid these stocks for now.

Zoom Video Communications (ZM)

ZM provides an online platform for video calls, voice chat, and text chat. The company’s cloud platform also enables content sharing. ZM’s stock has lost 26.6% since hitting its high in October.

ZM is currently facing a lawsuit that alleges that the company has been invading user’s privacy and misrepresenting its security protocol. Privacy concerns are a major issue for technology companies, and ZM may need to bolster its privacy offerings in the future.

In its last reported quarter, ZM saw an increase in revenue of 367% year-over-year. However, the sharp revenue increase was largely driven by the need for remote working due to the pandemic. The company may face a decline in revenue as the pandemic ebbs and the need for video conferencing retreats.

ZM’s poor prospects are also apparent in its POWR Ratings. It has a “Sell” for overall POWR Rating and an “F” for Trade Grade. It is ranked #37 of 65 stocks in the Technology – Services industry. ZM shares were trading at $346.93 per share on Wednesday morning, down $13.90 (-3.85%). Year-to-date, ZM has gained 2.85%, versus a 0.07% rise in the benchmark S&P 500 index during the same period.

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