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Why I finally invested in Zoom $ZM last week, even at sky high valuations, and how $ZM is changing the world.
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Over the last few months, the COVID-19 pandemic has changed the world, accelerating the adoption of digital technologies like $ZM, $WORK, and $TDOC. Significant questions remain, however, as to how these companies will perform in a post-pandemic era.
These questions are what kept me out of $ZM initially. Sure, it‘s skyrocketing right now, & the world is certain to look different when COVID is gone. Yet, the majority of schools & employers will likely significantly reduce their use of Zoom once people can safely work together.
Furthermore, I don’t want to live in a world where all meetings, classes, etc. are online. I value in person connection and learning. So I didn’t necessarily think $ZM would die after the pandemic, but I couldn’t possibly imagine that it would continue to grow.
Over the last few weeks, however, I have realized that there is still tons of opportunity for $ZM to grow. It’s definitely not going to maintain 169% Y/Y revenue growth, but it can be a winner for years to come. Here’s why:
(1a) Changing the World - before the COVID-19 pandemic, the world was more connected than ever before. I can go on $ETSY and buy something from Argentina in a second, or send an instantaneous message to someone in Vietnam over WhatsApp. $ZM is doing the same thing.
(1b) With $ZM, a child in India can take live English lessons from a tutor in Ohio. A global company can have a meeting with people from London, Tokyo, and New York without any travel. And a small firm can host a webinar with attendees from all over the world.
(1c) The rapid adoption of $ZM by millions of people around the world has made it the premier platform for each of these events. $ZM doesn’t need a pandemic to be successful. Rather, it can thrive by enabling those meetings that were not previously possible.
(2a) Innovation, Problem Soliving & Optionality - $ZM has demonstrated a remarkable amount of responsiveness & optionality over the last few months. Early in the pandemic, serious concerns emerged about the security of $ZM meetings. $ZM immediately brought in outside consultants
(2b) from firms like $CRWD and dealt with the issues. Similarly, $ZM is offering more services that companies can benefit from after the pandemic. Zoom Phone, for example, is a valuable innovation, while their recent forays into hardware demonstrate another level of optionality.
(3) Strong Financials - $ZM has tons of cash, little debt, high gross margins, and positive and growing free cash flow. The company is profitable and has plenty of wiggle room to experiment with new innovations. Furthermore, their revenue comes from subscriptions & is recurring.
(4) Management & Culture - $ZM is a founder-led company with high levels of insider ownership, meaning the company’s leadership believes in its future. Founder/CEO Eric Yuan has 98% approval ratings among employees, and people LOVE working there, giving it 4.7/5 stars!
Overall, $ZM checks all the boxes: great leadership, strong financials, an innovative culture, and provides a valuable service. It is highly valued right now, and there is no guarantee the stock will rise in the short term, but I am excited for what it can do over the long term!
