Zoom Video Communications, Inc. ZM shares rallied nearly 13% on Thursday as traders bid up the stock following the company’s quarterly results but Cathie Wood’s Ark Invest’s flagship Ark Innovation ETF ARKK deemed it fit to divest its entire stake in the communications technology company.
What Happened: Zoom Video, considered a COVID-19 play, was a staple in the ARKK ETF. At one point in time, the stock accounted for about 11% of the fund’s portfolio weighting, according to an influencer.
Trading disclosure from Ark on Tuesday showed the firm sold 424 Zoom Video shares it held in ARKK, and as a result, the proportion of the stock dropped to 0.0004% of the ETF’s holding. Zoom Video was not part of ARKK’s holding based on updated information available on Friday.
Ark now holds only a smattering of Zoom Video shares through its ARK Next Generation Internet ETF ARKW, with the fund owning merely 194 shares.
Incidentally, ARKK shed all of its Nvidia Corp. NVDA in early 2023 just before the stock began a stratospheric climb riding on the artificial intelligence mania.
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Why It’s Important: Zoom made its public debut on April 18, 2019, following a $360-million initial public offering. The stock soared on its debut, settling at $62 compared to the IPO price of $36 apiece. After a post-IPO surge, that took the stock as high as $104.49 in July 2019, the momentum moderated and the stock retraced almost all of its upward move before the COVID-19 pandemic struck.
The work-for-home and stay-at-home mandates that were in play during the pandemic provided a thrust to the stock and it peaked at a little under $600 in Oct. 2020. Since then, the stock has lost much of its luster. After outperforming the broader market and the tech sector during the pandemic years and until late 2022, Zoom Video has begun to lag them.
Ark’s valuation framework for Zoom Video released in June 2022 estimated a stock price of $1,500 by 2026.
Following Ark’s dumping of Zoom Video shares, YouTuber Joseph Carlson recalled CNBC Mad Money host Jim Cramer’s comments regarding Wood’s purchases made way back in Feb. 2022. “The only real buyer of some of this merchandise is Cathie Wood,” he had said then. “When I see her buying things, I am shocked at what she buys and how she buys like someone who just started yesterday.”
Fund management involves researching with a research team, putting the stock through securities analysis and then running it through a trader to determine the price, Cramer said then, adding that Wood seemed to have skipped the second and third steps.
ARKK ended Thursday’s session down 2.98% at $44.25, according to Benzinga Pro data. This is a far cry from the nearly $160 level it traded in early 2021. The ETF has shed over 15% so far this year even as the S&P 500 Index has climbed nearly 17%.
Zoom Video on Thursday climbed 12.97% to $68.04.
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