Dismissals. Losses. Falling share price. These pandemic winners are now struggling

With people unable (or unwilling) to hit the gym, consumers rushed to buy his exercise equipment and, more importantly, to sign up for his online classes. Peloton posted its first quarterly earnings in calendar year 2020, as revenue jumped 139% and the stock soared 434%.

The boost was short-lived. As gyms reopened and class subscriptions and equipment sales plummeted, the outlook for the business also plummeted.

After posting a worse-than-expected fourth-quarter fiscal loss on Thursday, Peloton CEO Barry McCarthy wrote in a letter to investors that “naysayers will look at our fourth-quarter financial performance and see a melting pot of declining revenue, a negative gross margin, and deeper operating losses.They will say this threatens the viability of the business.

McCarthy, however, sees big things ahead of the company despite its woes, saying Peloton has made significant progress in its turnaround efforts and stemmed its cash burn rate.

Investors do not share his faith. Stocks have lost more than 90% of their value since the end of 2020 and are now worth less than half of what they were worth at the start of that year.

Peloton isn’t the only pandemic winner to recently turn into a post-pandemic loser. Many of the companies that convinced themselves – and convinced investors – that they were well positioned to continue growing once Covid receded were proven wrong.

Here are some other 2020 stallions who became duds in 2022.

Wayfair

The pandemic has forced people to stay home and, in millions of cases, start working from there. Many took the money they saved by not commuting or going on vacation to buy furniture and other items to spruce up their homes.

This homeware shopping spree has come to a screeching halt. Consumers have shifted their shopping priorities, especially amid sky-high prices for essentials such as food and gasoline that have forced many households to cut back on non-essential purchases. Now, such purchases are more likely to be for things like long-delayed travel plans rather than more stuff.
The change in spending has affected a wide range of retailers, including giants such as Walmart and Target. But perhaps the poster child for companies reeling from the change is online homewares retailer Wayfair, which just announced it is cutting 5% of its staff. In making the announcement, the CEO admitted that the company had been far too optimistic about its potential for continued growth.

“We’ve grown Wayfair significantly to keep pace with e-commerce growth in the home category. We were seeing the headwinds of the pandemic accelerating the adoption of online shopping, and I personally went to great lengths to hire a strong team to support this growth,” CEO Niraj Shah said in a letter to staff announcing the layoffs. “This year, this growth has not materialized as we expected. Our team is too big for the environment we currently find ourselves in, and unfortunately we have to adapt.”

It’s not just that the company isn’t growing as fast as it used to be. Like Peloton, Wayfair went backwards and in red ink. Revenue for the first six months of this year is down 14%, and it just reported a net loss of $697 million compared to a profit of $149 million in the same period of 2021.

Wayfair stock, which soared 482% between the end of March 2020 and the end of March 2021, essentially gave up all those gains.

Shopify

The Canadian software company that helps retailers sell online has also been a big winner when businesses have been forced to turn to e-commerce due to the pandemic. Last month, its founder and CEO announced that Shopify was cutting 10% of its staff because its gamble on continued growth “didn’t pay off.”

“Shopify has always been a company that makes the big, strategic bets that our merchants demand of us – that’s how we succeed,” CEO Tobi Lutke wrote in a memo to staff announcing the layoffs.

The company’s pre-Covid The growth of e-commerce has been steady and predictable, he said, but the early days of the pandemic brought an unprecedented surge in sales.

“Was this surge a temporary effect or a new normal? And so, given what we’ve seen, we’ve placed another bet: We’re betting that the channel mix – the share of dollars flowing through trade electronics rather than physical retail – would be a permanent five or even ten year leap forward,” he said. “We couldn’t know for sure at the time, but we knew that if there was any chance of that being true, we should expand the business accordingly.”

The good times haven’t evaporated as quickly as for some of the other pandemic winners. But they certainly backed down.

While revenue grew 18% in the first six months of the year from a year earlier, Shopify’s costs, including for research and development, nearly doubled. The company also suffered a paper loss of $1 billion on its equity investments in the second quarter, pushing it to a net loss of $2.7 billion for the period from a profit of $2.1 billion. dollars a year earlier.

Shares of the company have continued to hold up through 2021, but are down 75% so far this year.

Zoom

The online meeting platform doesn’t face the same challenges as some of the other former winners of the pandemic. Millions of people are still working remotely, at least some of the time, and Zoom (ZM) is always profitable. But profits fell 71% in the first half of this year due to rising costs. The company beat earnings forecasts and its share price is still just above pre-pandemic levels.
Zoom reported weaker-than-expected earnings this week and gave an outlook that disappointed investors, sending shares down 17% on the day the company reported results.

For the year, Zoom shares are down 56% and down 86% since their peak in late October 2020, when the pandemic was raging and there were no vaccines widely available.

Some of the blame for the fall can be placed on investors, who forged ahead and drove the stock price up 765% between the end of 2019 and its peak 10 months later.

Moreover, every good news about the fight against Covid was considered bad news for Zoom: shares fell 25% in the two days following the announcement of Pfizer’s success in clinical trials of a Covid vaccine in November 2020.

netflix

Netflix had a lot of success long before anyone heard of Covid-19. Even in the face of heightened streaming competition, the platform had a successful 2019 as two original films, Martin Scorsese’s “The Irishman” and Noah Baumbach’s “Marriage Story,” drew in both viewers and nominations for best pictures. “The Crown” returns for a third season with a new cast.

With this range, netflix (NFLX) the shares gained 21% during 2019, while its earnings rose 28%. The service added 27 million subscribers worldwide during the year.
But things have really accelerated with the pandemic shutdowns. Netflix added 16 million subscribers in the first three months of 2020 and ended the year surpassing 200 million subscribers for the first time.

Shares of Netflix have also soared, having more than doubled in value since the start of 2020 to hit an all-time high of $691.69 in November 2021.

But the competition has increased. In the first trimester this year, the company lost 200,000 subscribers worldwide, the first drop in subscribers in a decade, and a far cry from the 2.5 million gain it had previously forecast. In the second quarter, it lost another 970,000.

The company also lost investor support. Netflix shares have lost nearly two-thirds of their value since the start of the year, although they rebounded from a 12-month low in May when investors braced for even bigger subscriber losses.

Comments are closed.