Popular stay-at-home stocks like Peloton and Zoom, which surged during the height of pandemic lockdowns in 2020, have taken a beating this year as investors increasingly focus on companies that will benefit from the economy reopening and consumers returning to in-person activities.
While some of last year’s hottest companies saw incredible growth during the pandemic, many are now struggling as earnings show a slowdown in momentum and the wider reopening of the economy gains steam.
Videoconferencing service Zoom and at-home fitness equipment maker Peloton were considered pandemic-era stock market darlings, with shares of each rising roughly 400% in 2020.
As the U.S. economic reopening gained speed in 2021, however, many of the companies at the center of the pandemic stay-at-home trade have seen share prices fall and are vastly underperforming the rest of the market.
Shares of Peloton and online education company Chegg are both down roughly 70% this year; digital real estate marketplace Zillow and virtual healthcare company Teladoc over 50%, Zoom and smart TV company Roku roughly 40%.
While some of those declines can be chalked up to investors increasingly focusing on reopening trades—companies that will continue to benefit from a wider economic recovery—many of these pandemic favorites have also recently reported lackluster earnings that show a slowdown in business.
Peloton saw its stock plunge 35% in a single day after lackluster earnings and slashing its sales forecast for 2022, while Chegg plummeted nearly 50% after its earnings showed revenue took a hit from more schools reopening.
Travel stocks—including airlines, casino operators, hotel companies and cruise lines—have all posted larger gains so far this year. Other companies directly tied to the reopening of the economy have performed well in recent earnings: Uber last month reported its first-ever quarterly adjusted profit as demand for ride-sharing recovered, while Airbnb had its “strongest quarter ever” as travel continues to rebound.
“It’s been a tough run for stocks that are keyed to the pandemic,” according to a recent note from Bespoke Investment Group. “This group of stocks is firmly in the ‘distribution’ phase of ownership post-pandemic, with massive valuations and sudden explosions in financial performance of the underlying businesses sliding inexorably into reverse and crushing prices.”
Not all pandemic-era favorites have plunged back down to earth. A few high-flying stocks from last year during the pandemic have continued to rise in 2021, like online retailer Etsy, which jumped nearly 300% in 2020 and is up 34% so far this year.
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