(Bloomberg) -- Zoom Video Communications Inc.'s recent surge in users due to the coronavirus outbreak could prove to be short-lived, Credit Suisse analysts said, lowering their recommendation on the stock to underperform from neutral.
Zoom's shares have soared in 2020 as the popularity of its video conferencing service has grown during a time of widespread lockdowns aimed at stemming the spread of the pandemic. Company shares declined 15% in early trading Monday, underperforming broader gains of 3% in the S&P 500 Communication Services index.
Credit Suisse analyst Brad Zelnick pointed to the “ultra-premium” valuation of Zoom's shares, expecting much of the rise in users to prove “ephemeral” or resting on free users and those in education, both of which are hard to monetize.
“We commend Zoom for being a superhero of the current health crisis, though our responsibility as equity analysts compels us to distinguish great companies from great stocks” -- Credit Suisse
Zelnick also cited concerns over the app's security, some of which he sees lingering for some time, and acknowledged competition from RingCentral's rival video product and Microsoft Corp.'s Teams corporate-chat software in the longer term. Zoom's shares have shed about 28% since reaching a record high on March 23.
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