While billions of people around the world shut themselves indoors, only using their different technology devices to stay connected to work and their loved ones, companies like Zoom basked in newfound popularity and wealth.
However, on Wednesday 2 September the share price of Zoom dropped by 7 percent to below $400 as investors took profits off the table following a massive surge. Zoom had led a broad rally in enterprise software stocks after announcing its second-quarter results the previous day. The company’s stock rose 41 percent on Tuesday after the video conferencing specialists said it saw an impressive 355 percent growth in revenue in the second quarter of 2020.
On Thursday, Zoom’s share price dropped further to $373 at 6:00 pm after opening at $399.
Some of the biggest technology companies replicated Zoom’s drop. The big tech-led a dizzying price drop in the US stock exchange. Apple went down by 8 percent, and Microsoft lost 6.19 percent to erase about $100 billion of value from the company’s market capitalisation. The high-flying carmaker Tesla also dropped 9 percent representing about a fifth of its value in three trading days. Tesla fell by 5 percent before the market began.
Facebook, Amazon, and Netflix were also in the red in early trading. Amazon declined 4.6 percent to eliminate almost $80 billion of value from its business. The decline saw the net worth of Jeff Bezos tumbling by $9 billion. Four of the richest tech billionaires in the US – Jeff Bezos, Elon Musk, Mark Zuckerberg, and Bill Gates – lost a cumulative $25 billion.
The drop in tech shares is coming after space led the lion’s share of the entire market’s comeback off the COVID-19 sell-off lows. The tech sector has risen about 70 percent since March 23. For the year, tech has rallied more than 30 percent.
“These companies are still all up a ton year to date,” said Lisa Abramowicz, an analyst with Bloomberg. “One day of blowing off steam doesn’t make a trend or even a warning necessarily. But the easy come, easy go nature of these behemoth’s paper values raises doubts about how connected these values are to fundamentals.”
It is also likely that as many countries released new guidelines that tend to bring back business activities and ease lockdowns imposed since March, the demand for online products is not as acute as it was during the lockdown. Companies are beginning to open up their offices and carrying out meetings onsite again.
For instance, analysts have suggested that Wall Street has grown cautious on Zoom due to rapid share gains and reopening efforts that have allowed most businesses to resume in-person operations. This has seen its stock rated a “Moderate Buy” based upon 12 “Buy,” and 8 “Hold,” AND 2 “Sell” recommendations
SOURCE: BUSINESS DAY
