Zoom Stock Price Retreats From the Highs As Company Faces Accusations of Privacy Violations

Zoom Stock Price Retreats From the Highs As Company Faces Accusations of Privacy Violations

  • Two U.S. state attorneys are seeking more information from Zoom in relation to privacy and safety accusations
  • Elon Musk’s SpaceX banned its employees from using Zoom due to privacy concerns
  • As of tomorrow, Zoom will make changes to boost security and privacy
  • Shares of Zoom closed the week 15% lower

Shares of Zoom Video Communication (NASDAQ:ZM) closed the week more than 15% lower, retreating from last week’s record highs above the $160 mark. In the meantime, the company is facing allegations of privacy violations.

Fundamental analysis: Two U.S. state attorneys looking into Zoom’s privacy practices

Over the last few weeks, multiple reports have emerged that question the privacy policy and safety of Zoom’s video-conferencing apps. These accusations have prompted at least two U.S. state attorneys to seek more information from the company.

“We are alarmed by the Zoom-bombing incidents and are seeking more information from the company about its privacy and security measures in coordination with other state attorneys general,” Connecticut Attorney General William Tong said.

In addition to Connecticut’s Tong, the New York State Attorney General, Letitia James, has written to Zoom asking the company to provide answers to a number of questions focused on users’ privacy and security.

“We appreciate the outreach we have received on these issues from various elected officials and look forward to engaging with them,” the company’s spokesperson said.

Reports of “zoombombing” – malicious actors entering Zoom calls and disrupting them by screen sharing offensive imagery – have emerged online in the past few weeks as the app’s popularity has skyrocketed recently on the teleworking arrangements.

Elon Musk’s SpaceX is one of the companies that banned the use of Zoom by its employees due to “significant privacy and security concerns”.

In a blog post posted on Zoom’s official website, the founder and CEO Eric Yuan apologized to users and promised changes.

“Transparency has always been a core part of our culture. I am committed to being open and honest with you about areas where we are strengthening our platform and areas where users can take steps of their own to best use and protect themselves on the platform,” said Yuan.

Following these promises, Zoom has moved quickly to prevent “zoombombing” and increase the level of safety and privacy for its users. Starting tomorrow, the Zoom app will require passwords to enter calls via Meeting ID while the hosts will now have to manually admit participants form the waiting rooms.

Technical analysis: The bulls lose momentum

As seen in the weekly chart below, the price action has created a monster bearish candle on the weekly chart. Most likely, this is a result of profit-taking activities conducted by early investors who wanted to cash-in on the recent surge in the Zoom stock price.

Zoom stock weekly chart (TradingView)

On the downside, the major support for the bulls is located near the $107 handle, while the week’s low was just below the $115 mark. Looking higher, the bulls would want to get back above the $140 handle first, while the target above record highs is above $180.

Summary

Shares of Zoom have rotated lower after recording a fresh high two weeks ago, which resulted in the stock price closing 15% lower. Zoom is facing accusations of privacy violations and has been contacted by two U.S. state attorneys, who are seeking more information from the company.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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