Zoom’s 13% Surge: Can Traders Ignore Cathie Wood’s Exit?
Zoom Video Communications (ZM) experienced a significant surge on Thursday, following the release of its quarterly earnings. However, the company’s stock took a surprising turn as Cathie Wood’s Ark Invest decided to completely divest its holdings in the communication technology firm. This unexpected move from the renowned investment firm has raised eyebrows and sparked questions about Zoom’s future prospects.
Zoom, once a darling of the pandemic era, was a cornerstone of Ark Invest’s flagship Ark Innovation ETF (ARKK). At its peak, the stock accounted for a substantial portion of the fund’s portfolio, reflecting the investor enthusiasm for the company’s growth potential. However, Ark’s recent decision to sell all of its Zoom shares has sent ripples through the market.
The firm’s disclosure revealed that it sold 424 Zoom Video shares, effectively reducing its stake to a negligible 0.0004% of the ARKK ETF. As a result, Zoom is no longer a part of the fund’s holdings. Interestingly, this is not the first time Ark has made a bold move with its investments. In early 2023, the firm also divested its entire stake in Nvidia Corp. (NVDA) just before the stock embarked on a meteoric rise fueled by the artificial intelligence boom.
Zoom’s journey began in 2019 with a successful initial public offering (IPO), attracting significant investor interest. The stock’s value soared during the pandemic, reaching a peak of nearly $600 in October 2020. However, as the world gradually returned to normalcy, Zoom’s momentum began to wane. Despite outperforming the broader market and the tech sector in the earlier years, the company has recently lagged behind its peers.
Ark Invest’s valuation framework for Zoom, released in June 2022, had projected a stock price of $1,500 by 2026. However, the recent divestment suggests a significant divergence between the firm’s valuation and the market’s perception.
The YouTuber Joseph Carlson drew attention to CNBC host Jim Cramer’s previous comments about Wood’s investment style. Cramer had criticized Wood’s approach, suggesting that she may be overlooking crucial steps in the investment process, such as thorough research and analysis.
Following Ark’s exit, ARKK’s performance has continued to struggle. The ETF ended Thursday’s session down 2.98%, significantly underperforming the S&P 500 Index. This marks a stark contrast to its earlier highs, when the ETF traded at nearly $160.
Zoom Video, on the other hand, experienced a short-term rally, climbing 12.97% on Thursday. However, the long-term outlook remains uncertain, as investors grapple with the implications of Ark’s decision and the broader market trends.
