Is It Time To Drop Zoom (ZM)?

The novel coronavirus does not discriminate. A prime minister can get COVID-19 just as easily as a convenience store clerk.

But the impact of the virus on individual stocks has been extremely varied. There have been massive winners, massive losers, and other stocks that are basically trading where they were a few months or even a year ago.

Some of the big winners have included ZM, GIS, CLX among others.

This is an extension of what I’ve been writing about the past several weeks. Some investing trends have caught fire due to COVID-19, while others have gone into a deep freeze.

For example, companies tied to 5G, connectivity, and the ability to work remotely are either prospering or weathering the current storm. Companies that have a business model focused on gathering large numbers of people in small spaces, such as airlines, cruise ships, and sporting or live event venues, are struggling mightily.

As it appears we are turning at least the first corner in the rise in COVID-19 cases, there is a bit of good news. I’d like to focus on some of the companies that will continue to prosper in what will most certainly be a different world when the virus subsides.

These companies had been growing their businesses before the virus struck, and have had lighter fluid poured on their business models as a result of operational changes forced by the virus. I don’t see many of these changes reversing, but instead, they will broaden now that these companies have established a true beachhead in their respective industries.

Zoom (ZM) has come under fire in the past few weeks for a lack of security and some rather inappropriate breaches of its video conferencing system, leading CEO Eric Yuan to apologize for the technology’s shortcomings. This reminds me very much of a little-known company that experienced some growing pains many years ago, America Online.

For those of you too young to remember, America Online was one of the first commercial internet providers, with their iconic “you’ve got mail” tagline. Early on, America Online came under fire for providing lackluster service when too many customers were overwhelming the system. The company adjusted, and its stock went on to a spectacular rise.

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