Post Covid, investors abandon Peloton and Zoom?
Investors had pushed hard on Peloton and Zoom last year. And now? Some “stay-at-home” titles, favorite during the pandemic, have experienced significant sales. The analysis of the New York Times
Peloton's expensive exercise bikes were the flagship product for fitness enthusiasts in the early days of the pandemic. With giant screens and upbeat instructors, being on them mimicked the experience of an in-person spin class in your own living room.
What happens now that it's possible to have the real thing again?
The stocks of companies like Peloton and Zoom , the online conferencing software that replaced face-to-face communications for countless schools and businesses, have been the darlings of the stock market for most of the past year. But as the reopening of the economy picks up speed – aided by soaring vaccination numbers and promising new treatments for those who get sick – some of the stocks at the heart of the so-called stay-at-home business have plummeted, the NYT writes.
"The markets clearly feel that the pandemic is over," said Ben Emons, chief executive of global macro strategy for Medley Global Advisors. "We are in full reopening and we are moving towards a normalized situation".
This was bad news for the share prices of some of last year's hottest stocks. Peloton was down 35% in a single trading session this month after deeply cutting its sales forecast for next year. Peloton chief executive John Foley said on a conference call with analysts that the company knew it would be a challenge to duplicate the results it had during the peak of the pandemic. But he added, "Our long-term thesis of fitness moving indoors is unchanged."
Shares in Peloton jumped 15.5% on Tuesday after a $ 1 billion share offer to raise funds, but are still down nearly 64% for the year.
Other once-hot stocks have also skidded. Shares of online education company Chegg plunged nearly 50% in a single trading session on November 2, and fell 67% in 2021. Zoom plunged 17% in a single day at the end of August, after noting that strong demand for its products has shown signs of easing as the pandemic fades. So far this year, it's down nearly 22%.
Instead, many investors are shifting their focus to corners of the market that last year considered inaccessible areas, with companies such as airlines, live events companies and commercial real estate companies making big gains.
The move away from government bonds did not affect the general momentum of the market. The S&P 500 closed 0.4 percent higher on Tuesday, hovering near another record, and is up more than 25% this year. After the index's upside-down recovery last year, and a nearly 29% gain in 2019, stocks are on track for the best three-year run since the late 1990s.
Investors owe most of the market gain this year to so-called cyclical stocks, such as oil companies and financial corporations, whose profits and stock prices tend to mirror the trajectory of the economy, rising and falling as growth accelerates. or slow down.
This is an abrupt change from the types of stocks that were at the epicenter of last year's massive rise – and a huge surge in trading.
As lockouts forced much of the country to stay at home – often with ample extra money from government stimulus and little else to do – millions of newbies have ventured into stock trading. Many of them bought shares of the products they were exposed to for the first time, such as Peloton, or those they used more frequently, such as Clorox. The logic was simple enough: As the economy went through one of the worst economic shocks on record, these companies seemed able to grow profitably through, and perhaps thanks to, the crisis.
“Non-moving stocks were the place to be, because that was where the growth was,” said Eric Mintz, a portfolio manager at Eagle Asset Management, an investment firm in St. Petersburg, Florida.
It was a disparate group of stocks: Zoom Video's shares were up nearly £ 400 last year, while Peloton was up around 470%.
Online retailer Etsy, which suddenly became a key source of homemade face masks, was up 300%. And the Wayfair internet furniture store went up 150% as people took refuge in their homes and tidied up.
At the end of last year, one of the funds that Mintz co-manages – the approximately $ 9 billion Carillon Eagle Mid Cap Growth Fund – owned a sizeable stake in one of these stocks, a portion of Peloton stock valued at around 136 billion. Millions of dollars.
But in the first half of 2021, the fund sold that position and built holdings in companies that are related to infrastructure spending, home improvement and health care, and which Mr. Mintz thinks offer strong potential for short-term growth.
"When you have this surge in reopenings, obviously you have a number of companies doing very well, and industries," he said, adding that when the economy improves, growth-focused investors don't need to flock to. " only a handful of titles ".
Not all companies that have risen in the past 20 months have returned to earth.
Etsy, for example, was up about 60% in 2021 as the company was successful in converting those who went to the face cover site into repeat customers. And online security company Zscaler – which rose more than 300 percent last year – has only continued to rise, climbing more than 70 percent so far this year.
"The market liked to bundle them all together: the pandemic trade against reopening," said Chris Mack, an equity portfolio manager at investment advisor Harding Loevner in Bridgewater, NJ. "The market is now having to go through and look at the underlying fundamentals. There are company-specific differences ”.
Recent earnings reports have provided some answers – and sometimes violent reactions from investors. Shares of Chegg – which provides digital textbook rental and online tutoring – fell in half earlier this month, wiping out more than $ 4 billion in market value after quarterly results were below expectations. The company was seeing "significantly fewer enrollments than expected this semester" as more clients cut their studies to return to work, Chegg chief executive Daniel Rosensweig told analysts.
Peloton's big drop came after it also missed earnings expectations, with a single day of losses accounting for much of its nearly 64% decline this year. (Planet Fitness revealed much better-than-expected results on the same day, as a wave of new customers pushed its gym memberships to 97% of the company's peak. Its shares are up 16% this month.)
But the darlings of the pandemic are not over, even as their most explosive growth has died down. Some investors believe that nearly two years of living at home has altered our behaviors so much that companies like Peloton and Zoom Video will remain part of our daily routine for the foreseeable future.
(Extract from the foreign press review by Epr Comunicazione)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/post-covid-gli-investitori-abbandonano-peloton-e-zoom/ on Sun, 21 Nov 2021 07:30:24 +0000.