DPF

Zoom shares plunge on slowing growth, as the “DPF effect” sets in

Wednesday, November 24, 2021 by Robinhood Snacks | Disclosures

What Zooms in must Zoom out… The Zoom boom may be over. On Monday, the company reported slightly better than expected earnings — but revenue growth slowed for the third consecutive quarter. Zoom’s quarterly sales grew just 35% from last year, compared to 10X faster growth a year ago. Shares slid 15% yesterday, dropping Zoom’s market cap to a third of its pandemic peak. Now Zoom’s focused on two things:

  • Corporate customers: The number of Zoom customers who spend $100K+ annually nearly doubled last quarter from last year, to 2.5K.
  • New offerings: Zoom is exploring growth opportunities, like licensing its video tech to other apps and letting people host paid events (think: Zumba class).

Zoomed in too far… Zoom’s growth didn’t just slow from pandemic highs: It had its slowest quarter since 2018. Other pandemic thrivers also experienced the “DPF effect” — demand pulled forward. Demand boomed all at once early in the pandemic (aka was “pulled forward”), then slowed as new customers dwindled. The stock market’s up 26% this year, but some WFH winners are seeing slowdown-driven selloffs:

  • Peloton shares are down 71% this year, after Equinox and SoulCycle reopened. Sales grew 6% last quarter compared to 232% in the same quarter last year.
  • Online education company Chegg’s shares are also down 71% this year as schools resume and subscription saturation intensifies (#subscripturation).
  • Pinterest shares are down 39% this year since everyone’s already created too many kitchen inspo moodboards.
  • Netflix added only 4.4M subscribers last quarter, and lost 400K subscribers in North America, after adding a whopping 36M subs worldwide last year.
THE TAKEAWAY

Some pandemic habits could stick… But Zoom could still lose to the conference room. People who flocked to Zoom, Peloton, and Chegg are returning to offices, gyms, and schools — and growth is slowing. But not everyone is experiencing subscripturation: DocuSign’s subscription revenue grew faster last quarter than a year earlier, because people who started signing digitally aren’t returning to physical paperwork.