This is Why Shares of Zoom Video Just Gapped Down

Small toy figures are seen in front of diplayed Zoom logo

Zoom Video (ZM) is taking a dive.

After reaching a pandemic-fueled high of $588.84, the video conferencing stock now trades at $199.04 and could be headed to $150 support next.

The company managed to beat earnings estimates.

In fact, adjusted EPS was $1.11, as compared to expectations for $1.09.  Revenue of $1.05 billion beat estimates for $1.02 billion, but slowed from 54% growth.  For the fiscal fourth quarter, Zoom forecast adjusted EPS of $1.06 to $1.07 on $1.051 billion to $1.053 billion in revenue.  Analysts were looking for adjusted EPS of $1.05 and $1.02 billion in revenue.

According to Bank of America analyst Brad Sills, as noted by, “The results and outlook suggest that reopening headwinds continue to weigh on growth and ‘record low’ quarter-over-quarter enterprise and online customer metrics suggest churn continues to weigh on customer count. A broader slowdown in both new customer growth and expansion activity, along with still heightened online churn, give little certainty as to the bottom for growth.”

With that, Bank of America downgraded ZM from a buy rating to neutral, with a $270 price target.  Wells Fargo lowered its price target from $275 to $245.  Evercore ISI lowered its target from $255 to $235. Stifel lowered its target from $300 to $275.

In short, don’t run out to buy ZM just yet.  Wait for the weak hands to finish selling.