Zoom Surges to Record High As Global Users Top 300 Million

Zoom will debut in the Nasdaq 100 next week as the web conferencing app's user base tops 300 million.
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Zoom Video Communications  (ZM) - Get Report shares opened at a record high Friday as investors price the group's move into the Nasdaq 100 and global users top 300 million.

Zoom is set to replace corporate advisory group Willis Towers Watson  (WLTW) - Get Report in the tech-focused benchmark on April 30, Nasdaq Inc. said Thursday, amid a surge in popularity for the communications platform driven by working-from-home dynamics linked to the coronavirus pandemic.

Zoom said earlier this week that its 90-day plan to tackle system security was on track and that the moves helped offset the loss of several high-profile clients such as Daimler AG  (DMLRY) , Ericsson  (ERIC) - Get Report, NXP Semiconductors  (NXPI) - Get Report and Bank of America  (BAC) - Get Report who have forbid or warned against the use of the web conferencing app.

“Clearly the Zoom platform is providing an incredibly valuable service to our beloved users during this challenging time,” CEO Eric Yuan said in a security-focused webinar. “We are thrilled and honored to continue to earn the trust of so many enterprises, hospitals, teachers and customers throughout the world.”

Zoom shares were marked 4% higher in early trading Friday to indicate an opening bell price of $175.78 each, an all-time high that would extend the stock's year-to-date gain to around 157% and value the San Jose, California-based tech company at just over $49 billion.

Zoom's security flaws, which have come to light in recent weeks by a series of high-profile hacks -- including the disturbing racial abuse of New York Rangers prospect K'Andre Miller -- lead to a sharp decline in the group's share price and significant investor losses.

A suit filed earlier this month in San Francisco by shareholder Michael Drieu, alleges that Zoom overstated its ability to protect users on the platform and failed to tell them that their communications weren't protected by end-to-end encryption. 

The U.S. Department of Homeland Security, however, said Zoom has been responsive to security concerns, according to a memo seen by the Reuters news agency, while CEO Yuan has vowed to 'double down' on security measures in the highly-popular communications app.

"Zoom has clearly expanded the opportunity for the $3 billion conferencing markets with recent working-from-home initiatives enabling a greater desire/need for collaboration/video capabilities," KeyBanc Capital analyst Alex Kurtz said in a recent client note. "We would note that if Zoom were to expand its opportunity to every knowledge worker in the U.S. (60 million seats) then this could represent a $10 billion market opportunity."

"If we expand this to the global (unified communications as a service) seat opportunity as a proxy for global knowledge workers (~450 million seats), then this would represent a ~$75 billion global knowledge worker total addressable market," he added.