Investors concerned about the effect the highly touted coronavirus vaccines will have on stocks like Zoom Video Communications Inc. (NASDAQ:ZM) that have greatly benefited from the pandemic may be looking to take profits today. This profit-taking is evidenced by a more than one-third drop in this stock from its November 2020 levels, a significant plunge. At these levels, some investors may be enticed to jump in, should they have missed the boat previously. Others may be worried about more downside potential on the horizon, given the speed at which this stock skyrocketed upward in such a short amount of time.
I think stocks like Zoom have certainly gotten ahead of themselves in terms of the amount of growth that is being priced into these equities presently. There is no reason to play momentum if one can’t grasp the fundamentals supporting a given stock. Right now, Zoom is still simply too expensive for conservative long-term value investors such as myself to own. That said, given the growth profile of this company, one might be able to make the case that this 35% drop represents an opportunity to get growth at a more reasonable price, and this stock could certainly outperform if the company posts insane results in the quarters to come.
I think there is an argument that could be made that this stock could continue to post very impressive growth in the quarters to come, despite the pandemic taking some of the wind out of the sails of the secular trend that has buoyed this stock during 2020. That said, investors need to take caution with such high-flying investments, and now is not the time to go overweight any particular stock.
Invest wisely, my friends.
