Video communications provider, Zoom, IPO'd earlier this week with the shares gaining 72% on opening day. There was a lot of negative chatter about this from the technology wags on social media. "It's in the same market as Microsoft Teams and Cisco WebEx, who would invest in this also-ran?"
Investors in Zoom are buying shares in a company that turns a profit, grew 119% year over year in 2018, has tightly controlled research and development costs and no debt. No. Debt. Zoom is a rare thing, a technology unicorn run by adults who are not using debt as rocket fuel to power a frantic grab for market share. While Zoom is overvalued the reason it is overvalued is that investors looked at a well-run technology company in a growing segment and decided they wanted in fast.
While it is in the same market as both MS: Teams and WebEx the difference is that as an investor you can invest in the growth of video communications, collaboration and conferencing for businesses when you buy Zoom shares. Something you can't do with those other two products. You can't invest in Microsoft Teams as you're buying Azure cloud growth when you buy Microsoft shares. Azure growth is a great thing to buy but it isn't video communications. Neither can you invest in WebEx, you're buying the cash flows from Cisco's networking business when you buy Cisco shares.
If Zoom has a major problem on the horizon it's the unrealistic expectations of their day one public shareholders. Best of luck Zoom team, you're going to need a few more years of 100% plus year over year growth to keep your new owners happy at the price they've set. They're hoping your Midas touch will create much more gold for them in the future.