Zoom $ZM has to be one of the craziest stock stories ever.
It became massively critical overnight.
It was the only stock that didn't crash during February & March 2020 (in fact, it gained +57% during the COVID crash).
But look at this...
🔵 Zoom $ZM
🟢 Nasdaq-100 $QQQ
Zoom peaked before anything else, in October 2020.
But the Nasdaq kept going up...
Since October 19, 2020:
• $ZM -87.8%
• $QQQ +97.6%
These are their returns since the stock market bottomed in Q4'22:
• $ZM +1.7%
• $QQQ +119.6%
It was so bad that Zoom even made new lows in both 2023 and 2024!
What makes it even crazier is that the company generates positive free cash flow and generates a net income!
Here's what Grok has to say on these topics:
"In the first quarter of fiscal year 2026, Zoom Video Communications (ZM) reported revenue of $1.141 billion, a 2.7% increase year-over-year, while free cash flow was $463.35 million, up 11.9% from the prior year's first quarter. Net income for the same quarter stood at $216.3 million, reflecting a 42.3% growth compared to Q1 2025. For the full fiscal year 2025, Zoom's revenue reached $4.567 billion, growing 3.8% from 2024, with free cash flow at $1.809 billion, a 22.9% increase year-over-year. Net income for fiscal year 2025 was $838.3 million, up significantly by 31.5% from the previous year, showcasing Zoom's strong financial performance and operational efficiency."
This isn't a failing business...
On the contrary, it seems to be rock solid.
Even from a valuations standpoint, the company is currently trading at a price to earnings ratio of 22.6x, basically in-line with the market. With EPS of $3.33/share (trailing 12M), it's clear that this is a company with actual fundamentals.
I don't own the stock.
I have zero intention of owning the stock.
But I can't help but look at this situation and think about how crazy it is.
It's a friendly reminder that the market can be brutal and totally unforgiving.
It's also a reminder of why I never invest based on fundamentals.
A stock's price to earnings ratio doesn't pay us.
A stock's free cash flow doesn't pay us.
A stock's valuation certainly doesn't pay us.
The only way we get paid as investors is:
• Buying low and selling high
• Buying high and selling higher
The only thing that matters is price.
That's why TA is so valuable.
Sure, at one point, ZM looked attractive during the dips in 2020 and 2021... but a prudent approach with trend invalidation would have stopped you out.
Yes, you would have lost money... but you would have avoided a trap based on fundamentals and avoided a -90% drawdown... because the fact of the matter is that fundamentals have looked solid for years, but price has been horrendous.
And that's all that actually matters: price.
Thanks for coming to my TED Talk.
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