Zoom Video (ZM) Banned by SpaceX Due to Security Concerns

Zoom Video Communications, Inc. ZM has reportedly been prohibited for use at Elon Musk headed aerospace company — SpaceX.

Per a Reuters report, all employees of SpaceX have been banned from using Zoom due to the presence of significant security concerns, and were asked to text, email or phones instead. The news comes days after the F.B.I warned users about security issues plaguing the popular communications app.

In response, Zoom issued an apology stating that the confusion was caused by the use of ‘end-to-end encryption’ in its marketing. Notably, the company can only encrypt content when all users are using the Zoom app and sessions are not being recorded.

Zoom is witnessing a spike in usage, as more people are working from home thanks to the coronavirus pandemic. However, the SpaceX ban is a major blow to the company’s reputation as it faces increasing competition from Cisco Webex and Microsoft MSFT Teams.

Notably, shares of Zoom have surged 101.3% year-to-date, outperforming the industry’s rally in the same time frame.

Zoom Video Communications, Inc. Price and Consensus

 

Zoom Video Communications, Inc. Price and Consensus

Zoom Video Communications, Inc. price-consensus-chart | Zoom Video Communications, Inc. Quote

 

Security Lapses a Major Concern

Zoom has been facing a lot of allegations in the past couple of years regarding its privacy and security policies. Notably, the company’s iOS app was recently accused of sending user data to Facebook FB, which ultimately led to a class action lawsuit.

The company was also accused of installing a secret web server on Mac computers, which it failed to remove after the client had been uninstalled. This prompted Apple AAPL to roll out a security update in order to save its systems.

These allegations have revealed a significant chink in Zoom’s armor and could lead customers to shift to more secure platforms like Teams and Webex that were recently made free to use.

However, the global coronavirus pandemic has turned out to be major boon for this Zacks Rank #2 (Buy) company, with daily active users (DAUs) growing 151% in March itself. In the United States alone, Zoom's daily user numbers hit 4.84 million on March 30 per Apptopia data, quoted by Reuters. You can see the complete list of today’s Zacks #1 Rank (String Buy) stocks here.

Moreover, Zoom’s growing global presence amid the outbreak has well positioned it to expand its market share and drive the top line over the long haul. (Read More: Zoom Expands Globally With Services in Additional Countries)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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