Zoom Video Communications, Inc. (ZM) is a San Jose, CA company that provides video-first communications platform that is looking to change how people interact. Its platform utilizes frictionless video, voice, chat, and content sharing. It has been riding high of late as downloads have spiked with more employees working from home.
Just as investors have been pricing in a new age of people working from home, there are questions of whether it will last. While the lack of a commute is a huge advantage for those in areas with high traffic congestion, some are having a difficult time “disconnecting” from work. Kate Lister, president of Global Workplace Analytics, discussed this trend, “We believe, based on historical trends, that those who were working remotely before the pandemic will increase their frequency after they are allowed to return to their offices.”
As investors continue to weigh the work-from-home investment opportunity, insiders in these companies in the crosshairs are doing the same. For companies like Zoom, the insiders appear to be taking the recent rally as an opportunity to sell shares.
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Since March 1, 2020, twelve different insiders have engaged in sell transactions totaling 642,508 shares. Assuming an average sale price of around $115, that is approximately $73.9M in value taken out of the company.
While this doesn’t mean that Zoom can’t continue to go higher, it does represent a lack of faith on the part of management at a point when their product is attracting significant interest. This may be an indication that your holding period may be more short-term in nature.
Action to Take: On Tuesday, ZM dropped nearly 15% with a potential near-term target of $120.
Speculators may want to consider a 17 APR 20 135/133 long put vertical for a net debit of around $1.50. This provides a max gain of $150 a contract, or 100% ROR, if the stock closes below $133 at expiration. Consider closing early if it can be sold for $2.40 of more per share.