Did Facebook Just Leave Zoom Stock Bulls Holding an Empty Bag?

Zoom stock has been soaring, but will Facebook halt its surge? | | Source: Kena Betancur / Getty Images / AFP

  • Zoom stock slid Friday after Facebook jumped into video conferencing.
  • An announcement by Mark Zuckerberg left Zoom plunging 6%.
  • But here’s the value Zoom offers that Facebook can’t touch.

Zoom stock (NASDAQ:ZM) had a wild ride this week. The freemium video conferencing platform’s shares jumped 11% Thursday. The company announced an increase of 100 million users since Apr 1. In other words, the coronavirus lockdown sent armies of teleworkers signing up to use Zoom. It’s been one of the most sought after virus stocks since February.

Zoom stock is up 52% since the S&P 500 peaked and the coronavirus crash began. The S&P 500 is down 16%, even after rallying by the last week in March. | Chart: TradingView

In a Thursday webinar, Zoom CEO Eric Yuan said:

Clearly, the Zoom platform is providing an incredibly valuable service to our beloved users during this challenging time. We are thrilled and honored to continue to earn the trust of so many enterprises, hospitals, teachers and customers throughout the world.

Anyone else getting Brady Bunch vibes from Zoom’s teleconference?

But Facebook (NASDAQ:FB) crashed the party Friday. An announcement of new video features called Facebook Messenger Rooms sent Zoom stock sliding. Facebook will now host video calls of up to 50 people in Messenger. ZM finished the session down six percent.

Facebook Crashes The Party With Messenger Rooms

The social network is planning on rolling out the rooms feature to its other digital properties, Instagram Direct and WhatsApp as well.

Some of Messenger Rooms features include:

  • Up to 50 people in a group video chat
  • Can invite non-Facebook users by link
  • Integrated into new Messenger desktop app
  • Private and public room settings
  • Mod powers to remove guests
  • Report function for Facebook rules violations
  • Augmented reality effects

Facebook plans to roll it out this week in some countries, and worldwide in the coming weeks. The features speak to the social media giant catering to user needs during the coronavirus pandemic. Seeing Zoom’s explosive success in recent weeks, the Menlo Park company is going after Zoom’s market share. But Zoom stock may not have anything to fear from Facebook.

Why Zoom Stock Has Nothing to Fear From Zuckerberg

Until recently, Zoom was primarily a business app that business professionals use to have meetings via video chat. That was how it climbed to its $1 billion unicorn valuation pre-IPO last year. And that’s the value proposition that Facebook can’t touch. Can you imagine doing a serious business meeting over Facebook?

That’s not what Mark Zuckerberg’s platform is for. By contrast to Zoom, Facebook has “always put friends and family at the core of the experience.”

Even if many of Zoom’s new users are there to do socially distanced happy hours with their friends, many of them are also business people looking for a video conferencing solution for remote collaboration. They’ve found they can use it to hire, manage, and work on teams remotely. That unique market won’t leave Zoom because of Facebook.

While Zoom stock is safe from Facebook, it may face a harsh correction ahead, along with a slew of other virus stocks, when the narrative-driven rally fizzles out along with the virus.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. The author holds no investment position in any of the stocks mentioned at the time of writing.

This article was edited by Aaron Weaver.

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