Are Stay-at-Home Stocks Coming Back Down to Earth?

The businesses that have flourished under the global pandemic are trailing the market for the past week. Will these stocks continue to fall as the economy recovers?

In the past 5 days, the S&P 500 (NYSEARCA:VOO) is up 2.6% off the back of encouraging economic news, while more and more states put plans in place to alleviate lockdown measures. Interestingly, the Nasdaq (NASDAQ:QQQ) is only up 0.32%, while the Dow (NYSEARCA:DIA) leads the charge, up 4.32%, meaning it is more traditional industries rather than tech stocks that are spearheading the rally for once.  

As the market looks to the future, investor sentiment is turning bullish on some of the most affected sectors which have seen significant sell-offs. The Airlines ETF (NYSEARCA:JETS) is up 18% over the past week, while retailers like Nordstrom (NYSE:JWN) and Gap Inc (NYSE:GAP) have seen jumps of 22% and 36% respectively. Even the much-maligned cruise liners look to be on the up and up, with Carnival (NYSE:CCL) seeing an 18% bump, and Norwegian (NYSE:NCLH) a whopping 38% increase over the past five days. 

While these battered and bruised travel and retail companies have their week in the sun, fortunes are not quite the same for the stay-at-home stocks which have flourished so far in lockdown conditions. This is the performance over the past five days of some of Wall Street’s quarantine darlings which have each hit all-time highs recently: 

  • Shopify (NYSE:SHOP) down 2.35%
  • Amazon (NASDAQ:AMZN) down 2.72%
  • Zoom (NASDAQ:ZM) down 6.65%
  • Peloton (NASDAQ:PTON) down 8.43%
  • Netflix (NASDAQ:NFLX) down 7.52%
  • Teladoc (NYSE:TDOC) down 8.63%

Is this a sign of things to come?

Is this a reckoning for the stay at home stocks which we have held so dear during these uncertain times? I wouldn’t be so sure. 

Microsoft (NASDAQ:MSFT) CEO Satya Nadella captured the nuanced nature of this downturn when he said: 

We’ve seen two years’ worth of digital transformation in two months.

People and businesses have been forced to adapt since the pandemic struck, and adapt they have. Retailers have moved online, businesses have started working remotely, people now exercise, go to the doctor, and meet their friends over video. This type of behavior has been forced upon us, but will we immediately drop these habits once restrictions have been lifted? Will retailers immediately sever their new e-commerce store, or will companies cease their new working from home procedures?  

In case you missed it: 

I’m not saying Zoom happy-hours will be a permanent installation in our lives, but there is a sense that many of the behavioral changes brought on by the pandemic were in the pipeline anyway. Case and point: Facebook (NASDAQ:FB), Shopify, and Twitter’s (NYSE:TWTR) recent remote working plans. 

While we might see a pullback in these stay-at-home stocks over the short-term as restrictions are lifted and life returns to some semblance of normalcy, it does not take away from their long-term prospects. They remain future-relevant business. While current conditions are a perfect storm for many of them, trends like telemedicine, remote working, connected fitness, and e-commerce are here to stay. I feel that any investor who may have sold Shopify or Teladoc to buy into cruiseliners or airlines may be rueing that decision in years to come.

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