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While businesses like Zoom and Peloton have witnessed a massive surge in its user-base, popular short-seller Jim Chanos says that one must study these companies fundamentals before investing in them rather than going with the wind.
While the COVID-19 pandemic has wiped out investors’ gains in the market, there are few stocks doing pretty well in this period. With several companies allowing their employees’ work-from-home facility, some businesses are really having big opportunities in the market. This includes video conferencing apps, home fitness apps, etc. Some businesses like Zoom Video Communications (NASDAQ: ZM), Teladoc, Peloton Interactive Inc (NASDAQ: PTON), and Clorox are seeing good opportunities in this lockdown period. However, speaking to CNBC, Jim Chanos, the founder of Kynikos Associates, has warned investors about these stocks.
Referring to them as the “virus stocks”, Peloton said that these businesses are “doing well right now in this enforced lockdown”. He further added:
“A lot of these companies are really not structurally growth stocks that are trading at 30, 40, 50 times earnings because they are going to do well in the first and second quarters of 2020.”
Though Peloton (PTON) stock now looks better than many others, yesterday it lost 4.36% to trade at $26.74. However, today in the pre-market, Peloton (PTON) is 1.16% up and has reached the level of $27.
The coronavirus pandemic has put a majority of the global cities under lockdown. As said, this has forced many employees to work from home. As on Wednesday’s closing, shares of Zoom have surged 101% year-to-date. Similarly, shares of Teladoc has spiked 94% and that of Clorox has spiked 14%. Chanos said:
“Of course when the virus subsides, and we all know it will, those companies will probably begin to not look as attractive going forward. I would tell your viewers to be very, very careful about just piling into things that are doing well because people are inside and will stay inside for the next three, four, five weeks.”
He further added that with social distancing rules in place, these companies are acting “contracyclical”.
Zoom (ZM) Faces Privacy Issues, Peloton (PTON) Launches Android TV App
Zoom has certainly witnessed a massive user surge in recent times. It is now grappling with the issue of privacy. As per the stats from SimilarWeb, the daily traffic on Zoom.us has shot to 535%. Besides, its iPhone app has also been the most downloaded apps in weeks.
However, security researchers have raised an alarm for users calling Zoom as a “security disaster” and “fundamentally corrupt”. Earlier this week on Monday, Letitia James, New York’s attorney general wrote a letter to Zoom seeking an explanation about the security concerns and how it plans to accommodate this massive rise in user-base. Speaking to The Guardian, a Zoom spokesperson said that they would comply with the request. The spokesperson said:
“Zoom takes its users’ privacy, security, and trust extremely seriously. During the Covid-19 pandemic, we are working around the clock to ensure that hospitals, universities, schools and other businesses across the world can stay connected and operational.”
On the other hand, Peloton, an at-home exercise company has announced bringing its app to Android TV. With gyms getting closed due to lockdown, Peloton has seen a massive surge in its user-base. Besides, Peloton has also extended its free trials from 30 days to 90 days. The Peloton app is already supported on Chromecast, AirPlay, and FireTV.