October 15, 2020
Last spring, Megan Mullaly’s sixth-grade social-studies class finished its unit on ancient India by gathering to watch Sanjay’s Super Team. This short animated movie is about a young boy who imagines Hindu gods as superheroes. When it was over, the students remarked that some of what they’d learned in class had showed up in the film. Then they watched it again. The class did all this not together in a classroom but remotely, using the video-conferencing technology Zoom.
Those students weren’t the only ones learning remotely. A few weeks after COVID-19 was declared a pandemic, 90,000 schools in 20 countries were using Zoom. And not only schools were using it. Businesses held meetings. Doctors saw patients. You might have used Zoom for a playdate or party. By December 2019, Zoom had 10 million daily participants, according to Bloomberg Businessweek. By late April, it had 300 million.
But Zoom isn’t just a technology. It’s the publicly traded company Zoom Video Communications, Inc. That means it’s a stock. Looking at that stock over the last few months provides a window into the risks and rewards of investing in the stock market.
Demand for Zoom
A stock is a share, or piece, of a company. Stock markets, or exchanges, are where stocks are bought and sold. Think of them like farmers’ markets, but instead of selling corn and tomatoes, they sell shares. The price investors pay for a stock depends on the supply (how many people want to sell it) and the demand (how many people want to buy it). When there is more supply than demand, the price goes down. When there is more demand than supply, the price goes up. Last spring, there was a lot of demand for Zoom.
Zoom has employees in China, where the first coronavirus lockdowns took place. The company saw what was happening worldwide and promoted its free version so people could connect while staying at home. The product took off. And so did the stock price. On January 2, before COVID-19 hit most of the world, one share of Zoom cost about $70.
Ups and Downs
In that time, the Zoom stock price didn’t go straight up. On March 23, it was $160. By April 7, it had dropped to $114.
So what happened? In late March, people started questioning whether Zoom’s privacy and security protections were strong enough. Zoombombers—people who crashed video-conferences they weren’t invited to—became a problem. Because of this, some investors sold their stocks. Demand went down, and the price fell. Since Zoom dealt with the problem, the stock price has trended upward.
It’s not unusual for a stock price to go up and down. Individual stocks are risky. When you buy them, you’re making a bet on how well a company will do. That’s why experts recommend diversification, or buying stocks in a lot of different companies at once, generally through a mutual fund. A mutual fund can be a collection of hundreds or thousands of stocks. Stocks that fall are balanced out by those that rise.
As the country starts to open up again, many people are wondering what that means for Zoom. Companies like Twitter and Facebook have said they will let their employees continue working from home. Online classes will likely continue to be popular, as well. Then again, there are other factors to consider. Ms. Mullaly says that even in her class, Zoom has competition: “Some of my students like Google Meet better.”
—By Rebecca Cohen
Extra! Click here to read a related article from TIME for Kids.