[Investing] Why I Am Not a Great Investor Yet: ZOOM

Today, I am starting a new series called “Why I am not a great investor yet…”

I will cover all my investment mistakes so we can learn together and not make the same mistakes again.

My first and recent mistake involves not investing in ZOOOOMMMMM-

Before the pandemic, I saw zoom class in action. There was a professor who was teaching from abroad.

And I thought cool-

Then the pandemic hit and we were all forced to use Zoom in m

So I thought hmmm may be I should invest in Zoom.

At that time Zoom’s P/E was already triple digits. So definitely expensive and as a value oriented investor, I was wary.

But I saw every school and tons of organizations use zoom.

Despite my gut telling me to buy a position, I decided to not dip my toes.

From: QuickFs

One of the main reasons that I did not invest in Zoom was because despite the high growth, costs were also growing fast.

And knowing that there were lot of disruptions and issues as everyone used Zoom, I knew that the cost will eat up the profits.

However, the revenues and profits were better than expected- (ooops) Revenues almost tripled and net income was almost 10X!

From: Zoom’s 10-Q

There were two more reasons why I didn’t invest in Zoom. First, there was a lot of news about security breaches and its data centers being routed to China. I expected some pullback- But that didn’t do much either.

Then the biggest reason, why I didn’t pull the trigger was because Google and Facebook were coming after Zoom. And we know that Google and Facebook are not joking- They can easily crush the competition.

Thus, my investment process went as follows.

  1. High growth can’t continue and cost control will become more difficult
  2. Security breaches/ China issues means higher cost and political risk
  3. Google/Facebook’s competing with zoom is very serious

Given the three strikes, I did not invest in zoom and I missed a 300% return opportunity.

ZM Zoom Video Communications, Inc. daily Stock Chart
From: Finviz

So the lesson?

Sometimes listen to your gut.

Open a small position and see how it goes.

Paying a some premium can reward you quite well!

Now, what’s my outlook for zoom?

I think it can go higher but this stock is priced to perfection. Any earnings miss or slow down in growth will crush the stock. I can see the stock easily dropping 20% with small bad news.

What would be the growth scenario? If zoom can increase its subscription price and provide other services, then zoom will go zooommm-

Thank You Jesus for another blessed day. Let us always be thankful and share Your love and blessings with other. Amen!

If you enjoy the content, you can support the blog through clicking the referral links that I use in my life: Acorns, Robinhood, American Express, evernote, and Scribd.

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *