Warren Buffett likes to remark that although it is not that difficult to see which industries will do well in the future, picking the actual companies that will thrive is incredibly difficult.
So, in the Thirties you didn’t have to be a genius to see that air travel was going to take off. But if you had bought shares in the top 10 airlines back then you would basically have lost all of your money — none of them survived.
And so to Zoom which today reported a seemingly bumper quarter — revenues of just over $1 billion.
That was a 54% increase on a year ago and at $1.36, earnings per share smashed expectations.
Like Google, Zoom has the honour of seeing its name become a verb, so vital have its services become.
It has become ingrained in popular culture — plays have been written about it and performed on it.
But in after hours trading on Wall Street today, the shares tumbled. Analysts used to praising the company noted that schools are reopening and offices coming back. Growth has slowed.
Presumably, we won’t zoom colleagues we are sitting next to.
Moreover, Zoom has a $100 billion valuation to justify, a huge market cap for a business founded just eight years ago.
On one level, Zoom is a brilliant invention. On another, well, it’s a phone call with pictures, something which is surely easy to replicate.
The trick for Zoom will be to use its high-flying equity to buy up rivals and other businesses that can help it expand. It is doing just that, lately buying cloud-contact software group Five9 for nearly $15 billion in shares.
So it’s got more than just a chance of surviving post Covid, assuming such a place is ever going to exist. The shares still look toppy. Avoid.