Zoom Video Communications Probing New High

Virtual meeting software provider Zoom Video Communications Inc. (ZM) exploded to the upside on the first trading day of September in reaction to a blowout Q2 2020 report, beating top and bottom line estimates by wide margins while raising Q3 guidance. The initial momentum wave stalled immediately near 480 but the stock withstood a week of aggressive profit-taking and has now mounted that level and traded above 500.

Zoom Rapid Growth

Zoom took off for the stars after millions around the world were told to stay at home in the first quarter to slow the spread of the COVID-19 pandemic. Their software has surged in usage since that time, becoming the most popular meeting application for businesses, social groups, and television hosts. Security issues undermined sentiment during the rally’s first wave but the Silicon Valley upstart has now cleaned out bugs and added protective layers to rebuild confidence.

Upgrades from BTIG Research and Goldman Sachs right after earnings intensified the upside but the failure of the SP-500 committee to add Zoom to the index a few days later added to aggressive selling pressure that stretched more than 130-points in a week. Most coverage has been neutral to bearish since that time, exposing the stock to profit-taking and short-term price action in the broad category of ‘COVID-19 beneficiary’.

Wall Street And Technical Outlook

Wall Street consensus has deteriorated since August, dropping to a ‘Moderate Buy’ rating based upon 10 ‘Buy’, 13 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $255 to a street-high $525 while the stock opened Tuesday’s U.S. session less than $50 below the high target. This placement, when taken together with lower ratings, could impede upside progress until the company’s next release in December.

Zoom held high above breakout support in early September and mounted the post-release high on Sept. 22, topping out at 529.74 one session later. The stock has been grinding sideways in a narrow consolidation pattern since that time, awaiting a catalyst that ends the stand-off. Selling pressure has increased in the last two weeks but oversold technical readings offer a slight edge to bulls, who could lift the stock toward 600 before a larger-scale correction kicks into gear.

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