CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Zoom shares: what next as its stock slides over security concerns?

The video conferencing app Zoom has seen its share price skyrocket due to the Covid-19 virus. However, recent developments might suggest a rocky road ahead.

Despite being a relatively niche video conferencing app just a few weeks ago, the California-based remote conferencing platform Zoom Video Services has rapidly become a household name, adding billions of dollars to its market capitalisation in March 2020.

Social distancing and isolation measures put in place due to the Covid-19 virus, which has forced offices and universities around the world to close, have caused demand for the services offered by Zoom to skyrocket as more people switch to remote working.

Since the start of the coronavirus outbreak, Zoom has seen its market value increase exponentially, reaching $42 billion (£34.2 billion) by 31 March. Between the beginning of February, when the virus was only beginning to go global, and 23 March, Zoom's share price more than doubled from $76.30 to a peak of $159.56.

However, despite this astronomical growth and the heaps of praise piled onto it by financial pundits, cracks are beginning to emerge.

Security concerns trigger share price plunge

As schools and businesses around the world began using Zoom for the first time over the past few weeks, concerns have grown over the security of the platform. A number of high-profile hacks of Zoom meetings, in which potentially sensitive data was exposed, has led to government authorities paying closer attention.

After SpaceX and Tesla CEO Elon Musk banned all employees from using Zoom, as did school districts across the US, it began to look like the party was over for the conferencing platform last week.

After the FBI met with Zoom's leadership team on 31 March and effectively ordered them to improve their cybersecurity infrastructure, the company's share price started to drop. Over the last week, the Zoom share price has dropped 18%, ending up at $122.90 by Monday’s close.

Despite rallying slightly when the NASDAQ opened on Monday morning, it's clear that investors and traders are feeling skittish about this once-hyped company.

An uncertain future for Zoom

For investors and traders considering whether Zoom is still a promising prospect, there are a few things to consider when attempting to predict the future of the company. For one, the company's CEO, Eric Yuan, has made strong public pledges to beef up the security of his app, with numerous privacy measures added over the past couple of days.

Perhaps more importantly, it's worth considering the longer-term prospects for the video conferencing market. There is little sign of the remote working arrangements necessitated by Covid-19 being eased any time soon.

Even if offices were to reopen tomorrow, the trend towards remote working, which has seen significant growth over the past decade, would continue to push ahead. Considering that Zoom currently enjoys one of the largest market shares within the video conferencing technology sector, this future growth bodes well for the long-term future of the company.

A lot will depend on how effectively Zoom can assuage security concerns and avoid future PR nightmares. Despite the disruption of the past few days, the company's future still looks bright.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.