Videoconferencing Stocks – Microsoft vs Zoom in 2020

April 2, 2020
477 Views

With enforced lockdowns and stay-at-home orders advised by a growing number of governments around the world, videoconferencing solutions for professionals are in high demand. While millions have been made unemployed due to the Coronavirus outbreak, there are countless companies of all sizes that have quickly adapted and allowed their workforces to telecommute.

Working from home comes with significant challenges. Communication is one of them. Two of the most popular solutions used for videoconferencing during this time are Microsoft Teams and Zoom.

Find out which one creates a better investment opportunity…

Zoom Has Lost Trust of Some Investors

Zoom Communications Inc. (NASDAQ: ZM) develops a video and voice conferencing application for professionals. Its platform also allows for content sharing. Zoom quickly emerged as a popular solution as many workers were advised to work from home last month. The stock rallied and is currently up 101.35% year to date.

However, Zoom has also been hit by major privacy and security problems, causing investors to question how viable it is as a long term investment. Zoom doesn’t have the experience of large software and service companies. It also has a limited history in the stock market, making it a particularly risky pick during the current health and financial crisis.

Microsoft is a More Reliable Alternative

Compare Zoom to Microsoft Corp. (NASDAQ: MSFT), and it starts to look much less attractive. Microsoft owns both the Microsoft Teams and Skype platforms. Skype is more consumer-focused, while Teams is designed as a complete communications and collaborative platform for professionals, small and medium businesses, and large enterprises. It integrates with Microsoft Office and Azure cloud services.

Microsoft is highly experienced in data security, thanks to its decades of operation and full ownership of its cloud infrastructure. The technology giant is no stranger to the regulatory environment, and many corporate I.T. departments strongly encourage or even mandate the use of its software for staff who work from home.

Microsoft is down -3.54% year to date, but analysts predict that the stock will grow significantly when the market eventually recovers. More importantly, Microsoft offers a stable dividend with a yield of 1.34% today. This makes it a much safer pick for investors who are focused on returns as well as long-term price growth.

A Clear Choice?

The average analyst considers Zoom to be overpriced today. According to projections, investors are more likely to lose money on the stock if holding for the mid-term.

Microsoft’s stronger overall business and financial performance in recent years makes it a more compelling choice for investors who want some exposure to videoconferencing solutions today.

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