Zoom Is Down 85% Since 2020. Here's Its Chart Ahead of Earnings
$Zoom Communications (ZM.US)$ sort of saved our jobs during COVID-19 (and saw its share price rise some 660% in the process), but the stock has fallen some 85% from its 2020 peak and is down year to date. Let's see what Zoom's chart and fundamental analysis say as the video-conferencing firm heads into earnings next week.
Zoom Communications' Fundamental Analysis
Zoom became a godsend for office workers during the pandemic, allowing them to meet via video while working from home.
The app's popularity drove Zoom's stock up nearly 660% from its February 2020 low just before COVID began in earnest to a $588.84 high by October 2020.
But shares have come back to Earth since then, closing Wednesday at $80.71 – down 86.3% from their 2020 top and off 1.1% year to date.
Now, Zoom is set to release fiscal Q3 results on Monday after the bell, with Wall Street looking for $1.44 in adjusted earnings per share on $1.21 billion of revenue.
That would represent a 4.3% gain from ZM's $1.38 in adjusted EPS for the same quarter a year ago, with sales up roughly 3% from the $1.18 billion the company saw in the same period a year earlier.
Interestingly, 24 of the 27 sell-side analysts that cover Zoom have revised their earnings estimates higher since the quarter began, while zero have cut their numbers. (Three analysts left estimates unrevised.)
Even more interestingly, Goldman Sachs strategist David Kostin included Zoom in a basket of 48 stocks he created in September that he saw as 2026 M&A candidates. Kostin put the odds of Zoom being involved in a deal at 15% to 30%.
Zoom Communications' Technical Analysis
Now let's take a look at ZM's chart going back some four months and running through Tuesday afternoon:
Readers will see that Zoom has developed a double-top pattern of bearish reversal stretching back to August, as marked with red boxes above.
This pattern's downside pivot stands just below $78, while the stock's 200-day Simple Moving Average (or "SMA," denoted by a red line in the chart above) currently runs about a dollar higher at $78.70.
Hence, this is the level where either strong support for the shares will likely show up or the stock will break lower. (As noted above, Zoom closed Wednesday at $80.71.)
Additionally, Zoom has developed a triangle pattern, shaded in pink at the chart's right. But in this case, the triangle is really just a broad pennant pattern that's marked with diagonal black lines at the chart's right.
The pennant appears to have come close to closing ahead of earnings – a pattern that can signal an imminent volatility increase, but doesn't tell you which direction (up or down).
So, Zoom has two patterns here – one signaling lower stock prices and the other pointing to increased volatility.
Meanwhile, Zoom has already surrendered its 21-day Exponential Moving Average (or "EMA," marked with a green line) and its 50-day SMA (the blue line).
This has probably cost the support of some swing traders and portfolio managers. However, losing the 200-day SMA – $78.70 in the chart above, a level that ZM has yet to break – would be the most significant technical loss of the three.
Looking at Zoom's other key technical indicators, the stock's Relative Strength Index (the gray line at the chart's top) is running just shy of neutral.
That said, the daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom) isn't looking all that bullish.
The histogram of the 9-day EMA has moved into negative territory, which is a short-term bearish signal.
Additionally, the 12-day EMA (the black line) has crossed below the 26-day EMA (the gold line). While both lines remain in positive territory, the black line appears to be headed for the zero-bound. All of that is more or less bearish.
An Options Option
Many options traders who are bearish on Zoom heading into earnings but looking to manage risk might employ a bear-put spread in this scenario rather than shorting the stock.
This strategy is composed of a long put along with a short put at a lower strike price, but with the same expiration date. Here's an example:
-- Buying one ZM $79 put with a Nov. 28 expiration (i.e. after the earnings date). This cost about $2.50 at recent prices.
-- Selling one Nov. 28 ZM $74 put for roughly $1.
Net Debit: $1.50.
This options trader would be laying out a net $1.50 to try to earn $5, for a $3.50 maximum gain should the trade work as expected.
If it didn't, the trader's theoretical maximum loss would be the $1.50 net debit.
(Moomoo Technologies Inc. Markets Commentator Stephen "Sarge" Guilfoyle had no position in ZM at the time of writing this column.)
This article discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. Moomoo and its affiliates make no representation or warranty as to the article's adequacy, completeness, accuracy or timeliness for any particular purpose of the above content. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct.
Options trading is risky and not appropriate for everyone. Read the Options Disclosure Document (https://j.moomoo.com/017y9J) before trading. Options are complex and you may quickly lose the entire investment. Supporting docs for any claims will be furnished upon request.
Options trading subject to eligibility requirements. Strategies available will depend on options level approved.
Maximum potential loss and profit for options are calculated based on the single leg or an entire multi-leg trade remaining intact until expiration with no option contracts being exercised or assigned. These figures do not account for a portion of a multi-leg strategy being changed or removed or the trader assuming a short or long position in the underlying stock at or before expiration. Therefore, it is possible to lose more than the theoretical max loss of a strategy.
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