- As markets tumbled this week on news of the Covid Omicron edition and inflation concerns, some of the worst performers were stay-at-home stocks.
- DocuSign, Etsy, DoorDash and Zoom all fell, while HP, Apple and Cisco saw gains.
- “It’s been a wild one,” said Byron Dieter, partner at Bessemer Venture Partners, which invests in cloud software.
A funny incident happened on the way back to the stock market.
Stay-at-home stocks that benefited the most from COVID-19 and the ensuing lockdown, such as Etsy, DoorDash, Zoom and DocuSign, were the worst performers this week. This is the opposite reaction that one might expect as the new Covid omicron variant, which the World Health Organization has called a “very high” global risk, makes its way around the world.
The sharp sell-off suggests investors are betting that, no matter what happens with Omicron, the US is done with the shutdown that has forced people to collaborate remotely for work and video with friends and family members. By forcing them to chat endlessly, it promoted food delivery and streaming TV services.
Shares of the pandemic darling Zoom fell 18% for the week, hitting a 52-week low of $177.12 per share on December 3, a 69% drop from its record high in October 2020. Shares of online marketplace Etsy, which became a haven. For mask shoppers at the start of the pandemic, it fell 21% for the week, while food delivery service DoorDash fell 17%, Roku fell 13%, Shopify fell 12% and Netflix fell 10%.
Meanwhile, e-signature software maker DocuSign, which tripled its value last year, more than 40% tank JPMorgan analyst Sterling Auty wrote in a note to clients, following the company’s weak fourth-quarter guidance Friday after “the pandemic tailwind came much faster than the expected halving.”
It was a lot of pain to move around in the technical field. The Nasdaq Composite fell more than 2.3% on Friday, down 3% for the week and was on pace for the fifth worst week of the year. Friday’s decline was driven by a disappointing jobs report at the end of the week, as well as Omicron concerns.
But some of tech’s blue-chip names took the pressure off. Apple, HP and Cisco all turned gains for the week, as investors seeking cover from market volatility turned into riskier, high-multiple stocks and cash-generating companies that paid dividends.
Earlier in the week, Federal Reserve Chairman Jerome Powell indicated that the central bank is so concerned about rising inflationary pressures that it may begin to reduce its bond purchases designed to boost the economy.
After Powell’s remarks on Tuesday, Apple was the only tech stock that was up.
“There’s quality flight with companies that you know will weather the storm, won’t go bankrupt, won’t have a financial crisis,” Needham analyst Laura Martin told Businesshala.
Apple slipped on Friday but is still up more than 3% for the week. HP shares rose nearly 8% this week and hit an all-time high on Friday. HP CEO Enrique Lore said last week that the company expects all of its segments to see strong demand for its personal computers for “the foreseeable future.”
Cisco rose more than 2% this week, and Intel and Broadcom were up less than 1%.
But for the tech mass, the market was a sea of red. Facebook, AMD, Adobe and Tesla all fell more than 5% for the week, while cloud software vendor Asana, the year’s best-performing tech stock, fell 39%, and Bill.com, a more recent Outperformer, dropped 23%.
Salesforce did its part to contribute to cloud concerns on Tuesday, when the company issued a weaker-than-expected fourth-quarter forecast. The stock is down 10% this week.
“It’s been a wild one,” said Byron Dieter, partner at Bessemer Venture Partners, which invests in cloud software, in an interview with Businesshala’s “TechCheck” on Friday. “You can look at four reasons. You can look at Omicron. You can look at inflation. You can look at interest rates. And you can look at the taker.”
Dieter, however, has doubts about what happened last year.
“As a reminder, working from home is really great for cloud stocks,” Dieter said. Inflation may be a cause for concern, he said, because “the downstream linkage to inflation can certainly lead to a rotation for the value of stocks and cash-generating stocks over time.”
Watch: Cloud stocks likely to remain volatile