Is This Company The Next Skype?

As more and more people connect digitally due to the COVID-19 outbreak, why has Zoom benefited so much more than its competitors?

It is an interesting time, with most people locked inside their homes to avoid catching the coronavirus. This makes at-home technology more important than ever. While we used to say ‘let’s Skype’ to our parents, we are now saying ‘let’s Zoom’ (NASDAQ: ZM) to our friends and colleagues instead.

Why Has Zoom Become So Popular?

It might seem like Zoom is the new kid on the block, but it’s been around for 9 years. The California-based platform provides a way for people to connect through all manner of virtual activities.

My first experience with Zoom was back in 2019 when I had to communicate daily with colleagues across the globe and I must say it was very easy to use. So it’s no surprise to me that millions of businesses are turning to Zoom for team management.

Two months ago the company was getting just under 56,000 downloads a day. Since the coronavirus gripped the world, Zoom has become the most downloaded application in the Apple (NASDAQ: AAPL) App Store. On Monday, March 23 there were 2.13 million downloads across the globe, compared to 2.04 million the day prior.

Why Zoom Is Better For Business Video Calls

Microsoft-owned (NASDAQ: MSFT) Skype has the capacity to host 50 callers at one time for free, while 100 users can dial in to the same call when using Zoom. You will have to pay if the call is longer than 40 minutes, but this limit has been scrapped due to the virus. You don’t have to subscribe like you do with Skype, and let’s be honest, sometimes knowing a work video call won’t go over 40 minutes is a nice thought!

Zoom also has a handy built-in beautification filter which helps make you look your best, especially if you have just rolled out of bed to take your morning call with your boss. Backgrounds can also be shared and your screen/spreadsheets can be seen by others on the call if you want them shown. 

Many users report that Skype freezes a lot and the quality is just not as good. Overall businesses are picking the new ‘Skype’ as the calls are more seamless and they are able to record the chats.

Why Zoom Will Continue To Grow

Zoom was making big leaps before the coronavirus pandemic. The company ended fiscal 2020 with just over 81,000 customers and its fourth-quarter revenue increased by 78% to $188.3 million. There is no sign of slowing down for the platform as downloads in March went up by a huge 183% – meaning there could be $337 million in extra sales for the rest of 2020 if things stay on track.

As we are now in a bear market and the economy faces unprecedented times, Zoom has enough cash to survive the storm. The business had $855 million in cash, cash equivalents and marketable securities at the end of 2019 and no debt.

As for Zoom’s competitors, Microsoft acquired Skype nearly 9 years ago but it never managed to get much traction and consistency with Skype for Business, while Alphabet’s (NASDAQ:GOOGL) Google Hangouts doesn’t offer a free service and therefore has a smaller share of the market.

Is Zoom A Good Investment?

While the company is exploding because of the current pandemic situation it does face a number of challenges. Most recently there have been many concerns over its security. The technology company recently announced it would be addressing users worries over the next 90 days as it halts its feature updates. The move comes after a number of Zoom calls have been the victim of hijacking and recordings by third parties.

While the company is experiencing rapid growth in such an uncertain economic climate, worth almost $44 billion, the share price is high! So while I know i’ll be using Zoom at some stage this week to socialize with my friends, I wouldn’t purchase the stock just yet.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.