Why Zoom Video Stock Just Popped

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© Provided by The Motley Fool Why Zoom Video Stock Just Popped

What happened

The stock of Zoom Video Communications (NASDAQ: ZM) is still nearly 40% off its pandemic highs of early October, but it’s getting a bit of a reprieve from the sell-off today, and was up a solid 4% as of 2 p.m. EDT.

As The Wall Street Journal reported this morning, Zoom is shifting its business to emphasize a sales model in which it allows other companies to embed its video chatting technology into their own apps and websites. Under the new model, Zoom would still facilitate the video calls, but its involvement would be invisible to users because the Zoom brand would not be displayed.  

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So what

Why is this important to investors? Basically, it’s a new market that Zoom is opening, and a new revenue stream for the company.

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Similar to how Zoom introduced its product to consumers by offering free Zoom calls of limited duration during the pandemic, in order to encourage corporate customers to later pay for the service, Zoom will give customers under the new model 10,000 free minutes of Zooming per month, after which the company will charge by the minute. The more customers use the service, the more money Zoom will make.

Now what

Chief Technology Officer Brendan Ittelson predicts that the new service might facilitate virtual checkups by healthcare providers, for example, or make live-streaming easier for a social media company.

While the success of any new initiative is hard to predict, the Journal notes that “customers have been asking the company for the ability to integrate their tools more tightly with its videoconferencing technology,” so it seems there is already interest in this among Zoom’s customers. If successful, this new idea could be just the thing to take Zoom’s $2.65 billion in 2020 revenue and keep it growing, even after the pandemic ends.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool has a disclosure policy.

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