Yesterday, we talked about “reopening stocks” and started with Match Group (MTCH).
I promised you two more reopening stocks that popped up in our Green Zones.
But I have something way more urgent to tell you.
So, let’s hold off until Monday on the picks…
And talk about something WAY MORE IMPORTANT.
Protecting your money.
The Reopening Trend Could Pummel This Stock
The theme of today’s story is the same.
We’re looking at reopening stocks. But we’re also paying attention to at-home stocks.
There’s a tech company that Wall Street believes has a 35% upside from today’s price.
And if someone was on television talking about that upside, I might be willing to run to my computer, pound away on my keyboard, and buy shares hand over fist.
You’d consider it too, right?
After all, Zoom Video Communications (ZM) has dominated headlines for the last 14 months.
The videoconferencing giant was the darling of the at-home trade. With millions of people stuck at home, “Zoom” became a verb that described online meetings between friends and work colleagues.
Demand went through the roof. And the stock rallied to nosebleed levels.
Shares of Zoom surged from about $67 per share in January 2020 to a 52-week high of $588.84.
For those keeping score, that’s a 778% gain.
Today, however, Zoom is off 43.5% from that all-time high.
The average Wall Street price target is 35% higher than today’s price.
The casual observer might think this is a bargain-basement price at $332 per share.
But then, I read an article that absolutely blew my mind.
And after looking at the data presented, I immediately turned to our very own flagship product, TradeStops.
The result? Everyone who reads this could save a fortune.
Is This Foreshadowing?
I read an article from Bloomberg this week that might signal a difficult future for Zoom.
A data research firm called Apptopia analyzed the “digital application” habits of people in New Zealand over the last few months.
They wanted to see how people engaged with these meeting apps like Zoom now that the nation has lifted most social distancing guidelines.
New Zealand hasn’t seen many new COVID-19 infections over the last few weeks.
As a result, people have returned to the office, schools, and public places.
The declining engagement in Zoom and other apps like Microsoft Teams (MSFT) could foreshadow the coming months and even years for the videoconferencing giant.
Last May, more than 250,000 people in New Zealand used Zoom, according to Apptopia.
That figure fell to 183,000 in September 2020… and then plunged to just 60,000 in February.
In the U.S., the numbers have been better (as we still face lockdowns and distancing around the nation.) In February, about 10.8 million Americans used Zoom on a daily basis.
But that figure was 13 million back in September.
Microsoft Teams has been falling as well. In New Zealand, daily users fell by 30% from September 2020 to February 2021.
The U.S. has seen a 15.6% decline for Microsoft Teams in that timeframe.
What does this tell us? It tells us that there might be more pain ahead for Zoom.
So, what should an investor do right now when thinking about Zoom Video Communications?
Should they buy Zoom Video Communications?
The real question one should ask is this: “What does TradeStops say?”
TradeSmith is all about conviction and sleeping well at night.
So many users have put their faith in this because it gives you all the signals you need to make an informed decision about any company.
In the case of Zoom Video Communications, TradeSmith has been sounding the alarm.
It is squarely in the Yellow Zone, which signals that investors should hold off and wait for an all-clear signal. This signal has been evident now since March 2.
That’s when shares fell below $391 (and the TradeStops yellow zone). Anyone who bought into Zoom on March 2 at $391 or below (and ignored the signal) would now be down as much as 15%.
Meanwhile, the VQ on this stock signals sky-high risk right now.
If you’re like me and you don’t want to take on too much risk, the VQ offers you a very tight window of risk analysis on your stock prices. The higher the VQ, the more risk tolerance you will require to enter this stock.
Zoom might be a stock that has been owned by billionaires like Ray Dalio and Lee Ainslie, but I have a hunch that the price declines we’ve seen have been accelerated by their selling. We’ll know more about this in the coming weeks when we get updates on these fund managers’ positions from the Billionaire’s Club.
For now, I like to think that TradeSmith has outsmarted the market.
And saved some people a lot of money and heartache when it flashed that Yellow Zone signal.
So, if you already own Zoom, the yellow signal means hold to see if it goes back to green. But for everyone else, if Zoom does go back to green, that’s the all-clear signal you need to buy!
I’ll be back with more Buy Zone picks on Monday.