May 29, 2024


The Joy of Technology

The party’s officially over for at-home tech stocks


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Stay at home stocks are getting smoked

Tech stocks skyrocketed after the pandemic hit and the world went virtual. We pedaled it out on Pelotons (PTON) instead of hitting the gym, and we watched Netflix (NFLX) like it was our second job. Zoom (ZM) became a verb as we began chatting and socializing over video conferences; and thanks to DocuSign (DOCU), we didn’t even have to do serious business in person.

But it turns out people don’t want a completely virtual world. I’m vaccinated and boosted, and outside of wearing a mask in stores and on the subway, I’ve mostly returned to normal life — with the exception of working from home three days a week. I still spend hours playing video games, but that’s nothing new.

And chances are, if you or someone in your life isn’t immunocompromised, you’re probably living a nearly normal life as well. And at home, tech stocks are paying the price.

DocuSign and Netflix are well off of their pandemic highs, while Zoom, which was trading at $559 in October 2020, fell to $87.63 as of Wednesday afternoon.

Peloton crashed even harder after CEO Barry McCarthy revealed the company was “thinly capitalized” and that its turnaround is “hard work,” during the company’s Q3 earnings Tuesday.

In other words, the party’s over for at-home tech stocks.

We weren’t going to stay home forever

Throughout 2020 and 2021, the pandemic dominated everyday life. We spent holidays away from loved ones, avoided travel, and dreaded every trip to the grocery store.

To stay sane, many of us dove into stay-at-home tech. I played virtual beer pong with friends over Zoom, (the free version of course), binged “Tiger King,” “The Office,” and “Schitt’s Creek;” and ordered anything I could via Amazon.

Investors took note, piling into at-home stocks and sending their values soaring.

On Jan. 2, 2020, shares of Zoom traded at $68.72; by Oct. 19 they hit $569.43 a share. Shares of Netflix rallied longer, rising from $329.81 on Jan. 2, 2020 to a high of $691.69 on Nov. 17, 2021.

Peloton shares, meanwhile, jumped from $29.74 on Jan. 2, 2020 to $167.42 on Jan. 13 2021. DocuSign, which traded at $75.90 on Jan. 2, 2020, shot up to $310.05 by Sept. 3, 2021.

But those stock prices began to slide from those lofty heights after the world reopened, vaccines became easy to access, and people finally got off their couches.

Shares of Zoom have plunged 83.96% from $559 to $89.67 since their October 2020 high. Netflix is down 74.58% from $691.69 to $175.81, while Peloton is off as much as 92.52%, with shares collapsing from $167.42 to $12.52. DocuSign is down 78% from $310.05 to $68.19.

All of those stocks ,except for Zoom, are trading below their Jan. 2, 2020 share prices.

It’s not just a return to normalcy

These stocks aren’t falling only because we finally left our houses. Take Peloton, for instance; the company issued a voluntary recall for its Tread+ treadmill in May 2021, sending shares falling, and has been unable to control its expenses and slowing growth.

It brought in McCarthy to tackle both of those problems, but it’s going to take some time for the company to return to being the home gym darling it once was, if ever.

The company has too many of its bikes on hand, and that’s burning through its cash reserves. And it is set up to borrow some $750 million from JPMorgan and Goldman Sachs to help continue running the business.

Then there’s Netflix. Shares of the company are not only well off their highs, but the firm, which revolutionized video streaming, is now losing customers. In its latest earnings report, the company said 200,000 users abandoned the platform. Wall Street was expecting the business to add 2.5 million subscribers.

Ted Sarandos, Chief Executive Officer (CEO) of Netflix attends the premiere for the film

Ted Sarandos, Chief Executive Officer (CEO) of Netflix attends the premiere for the film “Red Notice” in Los Angeles, California, U.S., November 3, 2021. REUTERS/Mario Anzuoni

The company and analysts have been warning about the speed at which it was adding customers throughout the pandemic for some time, and that comparisons to prior quarters would be tricky. What’s more, Netflix has a lot more competition in Disney+, Apple TV+, HBO Max, and others.

On top of all this is the added crunch of inflation and rising interest rates, which are dinging stocks across the board. Still, while the broader S&P 500 is off as much as 15.8% year-to-date, each of the aforementioned stocks are down anywhere from 51% to 71%.

Of course, we’ll still use many of these companies’ products and services long into the future. But their biggest growth days look to be behind them.

By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley

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