Zoom shares slide over security concerns and growing competition

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(Reuters) – Shares of Zoom Video Communications Inc (ZM.O) fell 8% on Monday, adding to their sharp drop in the past few days as the videoconferencing app struggles with privacy concerns and increased competition from rivals with deep pockets.

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 share from “neutral” to “neutral”. Analysts on average assess the “holding” of stocks, 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”.

Microsoft Corp (MSFT.O) said on Monday that its Teams platform, which competes with Zoom, does not use customer data for advertisements and encrypts the data to protect itself from cybersecurity threats.

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.

FILE PHOTO: Eric Yuan, CEO of Zoom Video Communications poses for a photo after participating in a ringing ceremony at the NASDAQ MarketSite in New York, New York, United States, April 18, 2019. REUTERS / Carlo Allegri

“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, general manager Eric Yuan said last week.

Microsoft teams had 44 million users worldwide as of March 18, double what they announced in November.

Akanksha Rana reports to Bengaluru, additional reports from Munsif Vengattil; Editing by Saumyadeb Chakrabarty, Aditya Soni and Anil D’Silva

Our standards:Principles of the Thomson Reuters Trust.

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