By Runisan Natheeswaran, Staff Writer
The Covid-19 pandemic, responsible for the rise of “pandemic stocks”, is still ongoing, but gains pandemic stocks have previously made are now vanishing. The past week, major profile lockdown stocks Netflix Inc. (NFLX) and Peloton Interactive Inc. (PTON) have taken a tumble,
Shares of Netflix fell 21.8% Friday, its worst day since July 25, 2012, after fourth-quarter earnings reports revealed a substantial slowdown in subscriber growth. The company attributed this slowdown to additional competition within the streaming sector, with co-CEO Reed Hastings stating “It’s definitely frustrating for us, the current slower growth”.
Peloton Inc has also had its fair share of troubles, with shares plummeting 14% for the week after seeing a slump in demand for their equipment and virtual classes, with the gradual easing of pandemic restrictions allowing more people to go to gyms. Shares of Peloton have dropped more than 70% over the past three months to just $27.06, falling below the company’s initial public offering of $29.
Other stay-at-home companies are suffering as well, with Zoom Video Communications and DocuSign Inc. shares falling significantly, the lowest level since May 2020. Many companies that saw strong pandemic demand or have flourished during this time are now seeing their stock prices hit the hardest, as investors are starting to doubt the longevity of stay-at-home stocks. Could this be the end of stay-at-home stocks?
While the COVID-19 threat still remains an issue around the globe, the surge created by the omicron variant is showing signs of slowing down, with the WHO marking a slowdown in global numbers. With this sentiment, Wall Street began to reassess the diminishing growth prospects of “pandemic stocks”.
Gregori Volokhine, president of Meeschaert Financial Services attributes this sell-off to the fact that “more people are going out and leaving their homes. This trend has been going on for months.”
Many of these companies that thrived during the pandemic attained valuations that factored in the continuation of the fast growth seen during the pandemic. Kim Forrest, Chief Investment Officer at Bokeh Capital Partners mentions “theoretically, these are growth stocks in that you were supposed to grow into your valuation with higher earnings”.
Stay-at-home stocks might not come to a complete halt, but investors are still skeptical of them, especially with the current negative sentiment around them. They continue to face even more challenges as the markets remain on edge as the Federal Reserve begins to raise interest rates this year. With the stock market off to a less than ideal start in 2022 and stay-at-home stocks in the hot seat, investors will have to keep a close eye on them moving forward.