The Covid-19 pandemic isn’t over yet, but the boom it helped create for stay-at-home stocks is vanishing.
Netflix Inc. and Peloton Interactive Inc., two of the highest-profile stars of the lockdown era, both plunged Thursday -- the latest sign that investors have moved on from the so-called pandemic trade. Netflix expects to add a paltry 2.5 million users in the current quarter, well short of estimates. Peloton, meanwhile, is slashing costs to cope with slowing demand for its stationary bikes.
Netflix shares were down about 20% in premarket on Friday, holding the drop seen in late trade on Thursday. If the loss sticks, it would be the stock’s biggest drop in almost a decade. Peloton shares were up 5% in premarket after sinking 24% on Thursday.
The two companies are the latest darlings of 2020 to sink to levels not seen since the early days of the Covid-19 outbreak, when investors first deduced that lockdowns and easy-money policies from the Federal Reserve were going to send stocks like Netflix soaring.
Others are suffering as well. Zoom Video Communications Inc., the owner of the ubiquitous videoconferencing software, is trading at the lowest level since May 2020, as is e-signature company DocuSign Inc. Both stocks have lost more than half of their market values from record highs and slid further after Netflix’s results. Etsy Inc., the e-commerce company that saw strong pandemic demand for face masks and other products, is down more than 45% from a November peak. It last closed at its lowest since May.
Traditional media companies that have styled themselves as streaming businesses also took a hit in post-market trading. That includes Walt Disney Co. and ViacomCBS Inc.
Everyone expected a company like Peloton to suffer a slowdown as it emerged from the pandemic. But the severity of it came as a surprise. Peloton cut its 2022 forecast by about $1 billion, and it’s reportedly pausing production of bikes and treadmills to cope with the slump. Late Thursday, the company pushed back on the idea that it was idling factories to save money, but confirmed that Peloton was cutting jobs and “resetting” production.
“We thought there could be a softer landing in terms of post-Covid demand,” Paul Golding, an analyst at Macquarie Capital, said in a note. “This dashes those hopes to some extent.”
The irony of pandemic favorites collapsing now is the Covid-19 threat has by no means subsided, and many areas are reimposing virtual schooling and even lockdowns. But the resurgence fueled by the omicron variant is showing signs of easing.
Netflix and Peloton had enjoyed a captive audience during the lockdowns. But having to hunt harder for customers isn’t the only problem as investors brace for Federal Reserve interest rate hikes.