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Zoom: Ignore The Pandemic; Focus On The Facts

Damon Verial profile picture
Damon Verial


  • Zoom is more than just a pandemic-specific stock; the company has leapfrogged the traditional marketing phase to become a household name.
  • Earnings sentiment predict excess returns.
  • The post-earnings gap is hard to predict but shows more potential in the long trade than the short one.
  • This idea was discussed in more depth with members of my private investing community, Exposing Earnings. Get started today »

Prior to Zoom’s (NASDAQ:ZM) earnings, when the stock was trading at $370, I recommended my subscribers either sell the Mar19 $400 puts into earnings or – alternatively – buy the Mar5 $450 calls. The former resulted in a profit of $8000 per contract, and the latter resulted in a profit of roughly $650 per contract, assuming you sell at the open today (Mar2).

My thesis was mostly earnings-based and based on statistical data – for the sake of short-term trading. But now that we have a position, it is important to determine a longer-term thesis so as to determine whether to hold or sell. Today, I want to give my general thesis on Zoom, run a lexical analysis on the most recent Zoom earnings call, and backtest the up gap that will appear today at market open.

Let’s start with the general thesis.

Zoom as a Company

Zoom became a household name during the pandemic. Many still do not understand why Zoom, of all programs, became the go-to platform for video conferencing. People who were aware of Zoom prior to the pandemic (and there are many) know exactly why the pandemic helped push Zoom into the mainstream: It is virtually the only video conferencing platform that can handle large groups. (Competitors do exist but are not widely employed. Cisco’s (CSCO) WebEx, for example, can act as a Zoom surrogate but is notoriously difficult to set up and utilize, which is especially problematic considering many of those who suddenly found the need for large-group video conferencing are not exactly tech-savvy.)

Prior to the pandemic, few people needed video conferencing for large groups (e.g., public school classes, court cases). With large meetings taking place in public, Zoom was unnecessary. And for most video conferencing situations – those either one-to-one or in small groups – simple platforms, such as Skype, did their jobs. The gravitation toward Zoom

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This article was written by

Damon Verial profile picture
Damon Verial is a statistical analyst who uses his skills to research stocks, options, and investment strategies. In addition, Damon is the writer of Copy My Trades, a trade-alert, subscription-based newsletter, available at his personal website. He is also the writer of Exposing Earnings, an in-depth earnings prediction service here on Seeking Alpha. . Damon makes his living as a gap trader, an earnings trader, and an interday trader. In his free time, he writes for Seeking Alpha, where he focuses on seasonal investing, market timing, and earnings analyses. . Damon has written several successful stock analysis algorithms, including algorithms that can predict gap closure, intraday patterns, and news overreactions. They will soon be publically available for subscribers. .Damon’s undergraduate education was in statistics and mathematics at the University of Washington; his graduate education was in psychology at National Taiwan University. He currently lives in Fukuoka, Japan.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ZM over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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