Zoom Video Communications Inc. (NASDAQ: ZM) has a market capitalization of above $50 billion. General Motors Co.’s (NYSE: GM) market cap is near $37 billion. The figures seem absurd. However, they show how investors value a star of the new world of technology compared to one of the largest from the old world of manufacturing.
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Zoom claims that “more than 300 million people around the world are using Zoom during this challenging time.” The statement does not say how many users Zoom actually has. As a matter of fact, its original statement about users was retracted and replaced with the number of people who used Zoom last month. And Zoom has had security problems, which it says it has fixed. Nevertheless, Wall Street pardoned the company. Its market cap is now $51 billion, up 164% this year.
Zoom’s revenue last year was a modest $622 million. On that, the company had $2 million in profit. There is no saying what Zoom’s revenue will be this year. The pandemic has caused most public corporations to tear up their forecasts. However, as video conferencing grows as a result of the spread of COVID-19, it is a safe bet that its top line will rise substantially.
GM is a prime example of how the pandemic has affected the value of a pillar of the manufacturing sector that has been a part of the U.S. economy for decades. It sold over 2 million cars in America last year. Worldwide, the number was close to 7 million. Last year it had revenue of $132 billion and a net income of $6.7 billion. GM management said it will not forecast numbers for the year. Fair enough, since any prediction would carry little or no weight.
What is certain for GM is that it could lose 10% to 20% of its U.S. sales, based on comments by industry experts about what is likely to happen with overall car sales in America this year.
While the difference in valuations seems hard to believe, it will persist and may widen.
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