Shares in video conferencing mainstay Zoom Communications could surge more than tenfold in price over the next four years as skilled employees working from home successfully resist management efforts to herd them back into the office.
Cathie Wood’s ARK Invest published on Wednesday its thesis for Zoom, the top holding in its flagship Innovation exchange-traded fund (ETF), complete with a $1,500 price target for 2026 and a minimum of $700 should its bearish scenario unfold.
“We believe current pivots back to in-office mandates could be part of a trial-and-error process for employees that will increase the percent of workers in hybrid/remote working models during the next five years,” ARK wrote.
Interestingly, the sentiment expressed effectively repudiates the management style of another major conviction call in ARK’s portfolio: electric vehicle manufacturer Tesla.
Critics including corporate executives have called CEO Elon Musk’s demands for workers to return to their desks for a minimum 40 hours a week with virtually no exception “tone-deaf” in the current environment.
ARK Invest instead seems to share the views of Salesforce co-CEO Bret Taylor, who described his $28 billion acquisition of Slack last month as a bet that remote work is not going anywhere.
“Knowledge worker backlash and talent shortages will compel employers to adopt more flexible arrangements,” ARK Invest argued. “Slack reports that employees forced to return to the office full-time experienced the steepest declines in work-life balance and overall satisfaction compared to their hybrid/remote peers, suggesting that in-office mandates will lead to high rates of attrition.”
ARK said it expects the total number of addressable knowledge workers excluding China to hit 832 million in 2026, of which 75% will engage in some form of flexible labor arrangement, up from 489 million and 51% last year.
Under its bull case, Wood’s money management firm even foresaw the share rising to $2,000 over the same period, compared to the $115.46 closing price from Wednesday.
Gave back all its gains
Following the pandemic, applications like Microsoft Teams and Google Meet, as well as productivity tools like Slack and Twilio, enjoyed unprecedented growth by combining the ability to share documents, presentations, and spreadsheets for remote collaboration during virtual meetings with practical features like instant messaging.
Zoom was one of the primary beneficiaries of this trend and even briefly overtook in value ExxonMobil in October 2020, when the California-based cloud software firm hit a market capitalization of $140 billion.
Yet many stock market darlings during the pandemic—most notably in-home fitness equipment provider Peloton—have since tumbled as investors fear their growth narratives are fundamentally broken.
Late last month, Zoom posted results for the first fiscal quarter through April that revealed its bottom line shrank by half amid a 34% surge in operating expenses.
Nevertheless, revenue gained 12%, proving it could still grow after the initial Omicron surge wore off, which was enough to satisfy investors and recoup a minor portion of its year-to-date losses. All of its gains from the pandemic have evaporated, though, with the stock trading around levels prior to the first wave of lockdowns.
In its most recent quarterly letter to investors, ARK said it maintained its “high conviction” in Zoom’s market leadership with increased penetration in the lucrative corporate segment of the market as companies shift permanently to hybrid work.
ARK Innovation currently owns 7.4 million shares of Zoom worth nearly $857 million, or 9.5% of its holdings, while its smaller ARK Next Generation Internet fund holds a further 1.1 million worth $131 million, or 8.1% of the total value.
Wood, who also owns shares in Zoom’s enterprise software rival Twilio, does not allow the weight of individual stocks in a fund to exceed 10% of its invested assets.
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