Zoom Video Communications has been removed from the Nasdaq 100 index, marking a significant shift in investor sentiment as the world adapts to post-pandemic realities.
Despite an impressive surge of nearly 400% in 2020 supported by the pandemic-driven move to remote working, Zoom's stock is up just 5.7% in 2023, trailing major equity benchmarks.
The company's sales growth has dwindled to single digits, contrasting sharply with its triple-digit growth during peak pandemic times. The return to office work and increased competition, notably from Microsoft (NASDAQ:MSFT) Teams, have significantly impacted Zoom's market position.
Zoom's decline is not isolated. Other pandemic favourites such as Peloton Interactive and Teladoc Health have also underperformed during the current market rally, dropping 23% and 13% respectively. Meanwhile, DocuSign, another beneficiary of the pandemic market, is exploring sale options amid slowed growth.
The exclusion from the Nasdaq 100 — a change that can affect investor visibility and trading liquidity — comes as many analysts adopt a cautious stance on Zoom. Around 70% of analysts now hold a "hold" rating on the stock, a notable increase from 41% in June 2020.
Zoom's cultural and market relevance has diminished as everyday users migrate away from the platform and revenue growth is expected to remain modest in the coming years.
In response, the company is diversifying its offerings, including contact centre software and chat services akin to Salesforce’s Slack. Despite these efforts, non-video segments have yet to significantly counteract the stagnation in revenue growth.
Zoom is actively seeking acquisition opportunities to rejuvenate growth, revisiting discussions for a potential acquisition of software maker Five9, although no transaction is currently underway.
In contrast, some stay-at-home stocks continue to thrive. Video streaming giants Roku and Netflix (NASDAQ:NFLX) have seen their stock prices increase by 136% and 60%, respectively. DoorDash (NASDAQ:DASH), another beneficiary of the pandemic, is set to join the Nasdaq 100 after a 108% rise in its stock price this year.