PreMarket Prep Stock Of The Day: Zoom Video Communications

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

On the show we discuss issues that may benefit from the COVID-19 crisis and that will often move in the opposite direction of the broader market.

When there is positive news — such as on Monday with a downtick in cases and deaths from COVID-19 in New York — these issues will go down. 

On the other hand, when there is alarming news regarding the crisis and the broad market tanks, on many occasions these issues will trade higher. That brings us to the PreMarket Prep stock of the day: Zoom Video Communications ZM.

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What Zoom Video Does 

For those not familiar with the company, Zoom Video Communications is relatively new and offers remote conferencing services that combine video conferencing, online meetings, chat and mobile collaboration. In fact, after years of testing other services, their service is utilized by Benzinga for the production of the PreMarket Prep Show, as it is easy to use and reliable.

Face-To-Face Meetings Must Go On

With a large percentage of the world’s population working remotely because of the crisis, business travel has come to a screeching halt. Nevertheless, business still needs to conducted, and Zoom has emerged as a popular platform for such a purpose.

In addition, with families unable to travel for special occasions that have been cancelled, the platform allows social interaction for large groups. Along these lines, with local social gatherings abruptly ending, small group interactions act as a good substitute.

Long-Term Zoom Video Price Action

Zoom's all-time low was made off its IPO in April 2019 at $59.94 and was revisited in October and December. Its all-time high was made only five session ago on March 20 at $161.69.

Market Rebound, Privacy Concerns, Downgrade

As the market has bounced back on the hopes that normalcy will return soon, the broad market has staged a huge rebound from its recent low. While Zoom prospered at the height of the crisis, it is being abandoned as the broad market rebounds.

Privacy concerns are being raised by the New York and Connecticut attorneys general.

Finally, before the open Monday, Credit Suisse downgraded the issue from Neutral to Underperform.

Zoom Video Moving Forward

As is so common in momentum issues, when the tide turns, it is hard to get it back. With the issue quickly retreating from is all time high, combined with potential fundamental problems surfacing, rebounds will be met with tons of sellers.

The combination of profitable longs wanting to lock in gains, underwater longs looking to break even or aggressive short sellers could be too much for the issue to overcome in the short-term — at least until its privacy concerns are alleviated.

The stock was down 8.49% at $117.32 at the time of publication Monday. 

Photo courtesy of Zoom Video Communications.