Explaining the Reasons Behind the Thursday’s Drop In Zoom Stock

Zoom Stock

Zoom Video Communications (NASDAQ: ZM)

In comparison, the S&P 500 is down 2% as of 12:55 p.m. ET, while shares of Zoom Video Communications (NASDAQ: ZM) are down 6.5%. Shares of the video communication expert have dropped 64% since the beginning of 2022.

Wall Street’s rising concern that the Federal Reserve’s activities may cause a recession in the coming quarters drove the market down on Thursday.

What’s the Reason?

Zoom stock price plummeted on Thursday due mainly to the roughly 3% decline in the Nasdaq Composite index, which includes many of Zoom’s peer companies in the technology sector. The Federal Reserve’s efforts to battle inflation by boosting interest rates have investors anxious about the economy’s performance in 2023.

The Federal Reserve plans to raise interest rates to dampen demand in the job market and other businesses that have been seeing unusually high activity levels.

Zoom stock and the rest of the Nasdaq dropped on Thursday as investors became increasingly concerned about future rate rises.

As customers cut back on spending in previously priority areas, the video communications expert has already seen its growth rate decrease to single digits in 2022. Financial markets are anxious that the slump may worsen next year.

What’s Next?

Zoom is placing a greater emphasis on the enterprise market, which is growing well and helping to offset declines in the consumer business. The company’s leadership is looking to diversify its offerings by expanding into artificial intelligence chat and internet telephony.

Monitor revenue growth, contract size, and contract renewal rates to gauge business health.

Meanwhile, investors in Zoom’s stock should brace for more volatility shortly. Due to the current economic climate of uncertainty, investors’ expectations for economic development shortly are fluctuating dramatically. Tech firms focused on growth, like Zoom, may see significant price fluctuations due to these changes.

Featured Image – Pexels © Anna Shvets

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.