Zoom shares slide over security concerns and growing competition

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Stock had hit a record high in March as demand for the app skyrocketed with millions of people around the world using it for everything from school lessons to business meetings amid locks imposed to slow the spread of the coronavirus.

But several reports last week that questioned the company’s data privacy practices have frightened investors, wiping out almost a third of the company’s market value from record highs.

The stock was down 7.9% for the last time to $ 118.05 on Monday and was the weakest performer on the Nasdaq.

Credit Suisse Brokerage downgraded the Zoom stock to “underperform” from “neutral”. Analysts on average assess the stock “hold,” according to Refinitiv data.

“While the implicit growth of new customers may seem undemanding compared to the recently disclosed growth of 20 participants, we expect that much of the recent increase will prove to be fleeting and / or come from free users or that are very difficult to monetize, “wrote Credit Suisse analysts. in a note.

Last week, at least two American lawyers asked Zoom for information following reports questioning its privacy and security.

Some school districts in the United States have started banning the app for online home learning due to increasing security concerns, the Washington Post reported on Saturday.

Reuters also reported last week that Elon Musk’s rocket company SpaceX had banned its employees from using Zoom, citing “significant privacy and security concerns”.

While analysts believe that many problems with Zoom, especially those caused by a user error, are likely to be resolved in the short term, others may remain for some time.

“I think it’s a legitimate reputation risk,” said DA Davidson analyst Rishi Jaluria, adding that increasing Zoom’s user base could be a challenge as it was originally designed to to be a business tool.

Daily Zoom users soared to more than 200 million in March, up from a maximum of 10 million previously, chief executive officer Eric Yuan said last week.

Microsoft teams had 44 million users worldwide as of March 18, double the number in November.

(Report by Akanksha Rana in Bengaluru, additional report by Munsif Vengattil; Edition by Saumyadeb Chakrabarty, Aditya Soni and Anil D’Silva)

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