Stay-at-home stocks, a pandemic-market favorite, are getting battered Monday after pharmaceutical giant Pfizer announced promising vaccine results that could reopen and restore a troubled economy, but might negatively affect companies like Zoom and Peloton that have benefited from the stay-at-home environment—at least temporarily.
Tech-heavy Nasdaq, which hosts stay-at-home staples like Zoom, Netflix and Amazon, is lagging the broader market on Monday, is up just 1% while the Dow Jones and S&P 500 are up about 4% and 3%, respectively, as industries left reeling by the pandemic celebrate news regarding the possibility of a return to normalcy.
Among the day’s biggest stock losers is pandemic phenomenon Zoom, which late last month surpassed ExxonMobil in market cap; shares are down 15% on Monday but are still up more than 500% this year.Peloton Interactive–which is gearing up for what could easily be its best holiday season yet–is also tanking about 15%, pushing its year-to-date gains down to about 260%.
Netflix, meanwhile, is down about 5%–a slightly smaller decline for a firm that’s still up nearly 50% this year.
Though not as hard hit as others on Monday, cloud stocks like Twilio, Slack and Datadog are also falling–about 3%, 1.5% and 1%, respectively–despite the broader market gains.
Stocks like Zoom and Netflix should be “long-term winners, [but they’ll] lose in the short term, as their valuations ran ahead of actual earnings,” says James McDonald, the CEO of Los Angeles-based Hercules Investments, adding that such firms have “likely already seen peak levels of adoption and revenue” in the short term.
“The enormous moves witnessed in some areas of the market are certainly due to a fundamental reassessment after the vaccine news, but [they] also reflect a huge positioning adjustment as investors try and dial back tech exposures and… buy names closer to the epicenter of the pandemic,” says Vital Media Knowledge Founder Adam Crisafulli. “Even though tech has been in the midst of a consolidation phase since the start of September, the group is still very owned and should this pro-cyclical rotation continue (which seems likely), momentum will face steep headwinds in the near-term.”
Experts aren’t totally convinced Monday’s stock gains–and losses–will be long-lived. “I suspect the markets, which are already in a bullish mood due to the incoming Biden administration, are overthinking the positive vaccine news,” says Nigel Green, the CEO of $10 billion advisory deVere Group. “There’s a long road ahead still,” he adds, noting that investors will have more clarity on the implications of Monday’s announcement by the third week of November, when Pfizer says it plans to submit its vaccine candidate to the FDA for approval.
Technology stocks have massively outperformed the broader market this year, with the Nasdaq composite up nearly 30% since January while the S&P 500 and Dow Jones are up about 11% and 2%, respectively. Monday marked a reversal of fortune between firms doing well during the pandemic and those that have been hardest hit. While stay-at-home stocks sink, shares of banks, energy firms, cruiseliners and movie-theater operators are surging.
Shares of Clorox, a pandemic breakout stock, are also slumping–down 7%–on Wednesday, though they’re still up 34% for the year.
-By Jonathan Ponciano, Forbes Staff