These privacy concerns have dampened the incredible rally ZM experienced in mid-March, with shares now trading down 22% on a five-day basis. This brings the stock’s year-to-date gain to 67%.
“We recognize that we have fallen short of the community’s – and our own – privacy and security expectations. For that, I am deeply sorry” the founder and CEO of Zoom, Eric S. Yuan, stated on April 1.
The company also today announced the creation of a CISO Council and Advisory Board and hired former Facebook Chief Security Officer Alex Stamos as an outside advisor. This is part of the company’s 90-day plan to better identify, address, and fix issues proactively and improve the safety, privacy, and security of Zoom’s platform.
“To successfully scale a video-heavy platform to such a size, with no appreciable downtime and in the space of weeks, is literally unprecedented in the history of the Internet” comments Stamos, adding that the real challenge “is how to empower one’s customers without empowering those who wish to abuse them.”
Indeed, analysts are displaying a cautious sentiment on ZM right now, with a Hold consensus and a $113 price target (1% downside potential). (See Zoom’s stock analysis on TipRanks)
Credit Suisse analyst Brad Zelnick downgraded Zoom to Sell from Hold earlier this week, telling investors that “the current share price embeds significantly greater conversion of free users than our upside model scenario.” He now has a $105 price target on the stock.
“We commend Zoom for being a superhero of the current health crisis, though our responsibility as equity analysts compels us to distinguish great companies from great stocks,” Zelnick concluded.
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