Daily Brief: Zoom’s Investors Are Leaving Almost As Quickly As They Arrived

Daily Brief: Zoom’s Investors Are Leaving Almost As Quickly As They Arrived

over 2 years ago3 mins

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Zoom reported better-than-expected earnings earlier this week, but investors seem to think last year’s most hip-happening communications platform is already a relic of the past.

What does this mean?

Now that kids and adults alike are getting back to school and offices, investors are worried that Zoom’s once-strong growth is already starting to dry up. And while the company’s revenue did grow 54% last quarter compared to the same time last year, that was a serious slowdown from the 191% growth of the quarter before. That deceleration looks set to continue, with Zoom forecasting just 31% growth this quarter. It makes sense, then, that the company is buying firms that specialize in other areas. It announced its first major target last month: Five9, a cloud software provider that helps other companies run their online customer support operations – the sort of business that’ll boom even when the world fully opens up again.

Zoom revenue

Why should I care?

For markets: Investors are hard won, easily lost.

Zoom sits alongside Netflix and Peloton as one of the stocks that benefited most from the pandemic. But just like Netflix and Peloton, investors have been quick to dump Zoom’s stock now those gains have started to vanish: they sent its shares down more than 15% on Tuesday, meaning its stock is now worth less than it was at the start of the year. That’s a pretty dramatic reversal of fortunes considering its value almost quintupled in 2020…

Zoom stock
Source: Google Finance

Zooming out: Robinhood has an existential crisis.

At least Zoom’s entire business model isn’t at risk, which can’t be said for another pandemic winner: commission-free trading platform Robinhood makes the bulk of its revenue selling its customers’ orders to market makers in what’s known as “payment for order flow”. But the head of a US stock market regulator said this week that she wouldn’t rule out an outright ban on the practice – a threat that saw Robinhood’s shares tank 7%.

Robinhood stock

Keep reading for our next story...

Eurozone Inflation Just Hit A Decade High

EU image

Fresh data out on Tuesday showed eurozone inflation hit its highest in a decade in August, but the European Central Bank (ECB) maintains there’s absolutely nothing to see here.

What does this mean?

The prices of goods and services in Europe’s 19 euro-spending countries climbed by a higher-than-expected 3% last month compared to a year before. That was the biggest jump since 2011, and a notable bump from the 2.2% of the month before. The usual suspects were to blame: rising energy prices and a strong rebounding economy that’s increasing demand for just about everything, all while suppliers struggle to keep up. Throw in a boost in demand in Germany following a temporary tax cut in the second half of last year, and it’s no surprise prices are ticking up so fast.

EU inflation

Why should I care?

The bigger picture: Get with the times, ECB.

This is the second time inflation has overshot the ECB’s new target of 2% this year, but you wouldn’t know it: the central bank is still insisting that a spike in prices is a temporary consequence of the pandemic, and it’s sticking to its current policies of ultra-low interest rates and substantial monthly bond purchases. That, even as the US Federal Reserve hinted last week that it’ll be tapering its bond-buying program before the end of the year.

For markets: Are you sitting comfortably?

If the ECB does start slowing down its bond-buying program earlier than expected, it’ll remove a major source of demand for European bonds, driving down their prices and pushing up their yields. It could have a knock-on effect on the stock market too, with investors tempted to rotate out of stocks and into bonds with now-more-attractive returns. And considering an index of major European stocks has just posted its longest winning streak since 2013, there could be a long way to tumble if they do…

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