In this article, we discuss 10 pandemic stocks that are losing value. If you want to skip our detailed analysis of these stocks, go directly to 5 Pandemic Stocks That Are Losing Value.
The outbreak of the COVID-19 pandemic in the beginning of 2020 triggered a freefall in share prices and the stock market saw historically huge declines across all sectors. Some sectors like aerospace, air and travel, banking, insurance, and energy took the longest to recover from the pandemic lows. However, companies offering online shopping, entertainment, remote education, and telemedicine exploded as people were forced to remain indoors during the peak of the pandemic.
Market Trends During The COVID-19 Pandemic
Trends like advanced electronics, innovative technology, and digital medicine were already on the rise when the COVID-19 pandemic gave them an exorbitant boost. Software as a service (SaaS) offerings also accelerated because a home environment required virtual communication and collaboration. Technology as a theme expanded into the healthcare and consumer discretionary sectors, with greater investments in surgical robotics, cloud-based life sciences, and e-commerce platforms.
Companies like PayPal Holdings, Inc. (NASDAQ:PYPL), Block, Inc. (NYSE:SQ), and Sea Limited (NYSE:SE) were also in focus as digital payments mostly replaced cash payments around the world. Gaming corporations such as Roblox Corporation (NYSE:RBLX), Activision Blizzard, Inc. (NASDAQ:ATVI), and Zynga Inc. (NASDAQ:ZNGA) also benefited from the pandemic immensely.
However, there are famous pandemic stocks which are losing value over time, as they are better suited to a home environment and do not hold the same significance in a post-pandemic world. Some of these companies include Moderna, Inc. (NASDAQ:MRNA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Netflix, Inc. (NASDAQ:NFLX), among others discussed in detail below.
Our Methodology
After a careful assessment of the stocks that exploded during the peak of the COVID-19 pandemic, we selected companies that lost the most over the past six months. We have discussed reasons for the companies declining in value as the pandemic eases.
We have ranked the companies according to the hedge fund sentiment around the holdings, which was gauged from the 924 elite funds tracked by Insider Monkey in the fourth quarter of 2021.
Image By peshkov – Adobe Stock
Pandemic Stocks That Are Losing Value
10. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 24
Loss in Share Price Over 6 Months as of March 1: 73.54%
Robinhood Markets, Inc. (NASDAQ:HOOD) operates a financial services platform in the United States, allowing users to trade stocks, exchange traded funds, options, commodities, and cryptocurrencies.
During the 2020 stock market crash, Robinhood Markets, Inc. (NASDAQ:HOOD) trading increased as retail investors joined the pandemic-driven investing frenzy. The company went public on the Nasdaq on July 29, 2021, and the stock plunged 73.54% over the last six months.
The earnings and revenue for the third and fourth quarter of 2021 came in below market consensus owing to lighter crypto trading amid the crypto crash of 2022. The management commented on the Q4 results, citing “seasonal headwinds and lower retail trading”.
On February 18, Deutsche Bank analyst Brian Bedell raised the price target on Robinhood Markets, Inc. (NASDAQ:HOOD) to $14 from $12 and kept a Hold rating on the shares. The analyst issued a mid-Q1 outlook for the brokers and asset managers and continues to favor the “rate-sensitive stocks” for at least the next two quarters.
Among the hedge funds tracked by Insider Monkey, 24 funds were bullish on Robinhood Markets, Inc. (NASDAQ:HOOD) in Q4 2021, up from 20 funds in the prior quarter. Cathie Wood loaded up on the stock despite underperformance in the recent months, and ARK Investment Management held roughly 24 million Robinhood Markets, Inc. (NASDAQ:HOOD) shares, worth $423.5 million. Wood’s fund increased its stake in the company by 142% in Q4.
In addition to Moderna, Inc. (NASDAQ:MRNA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Netflix, Inc. (NASDAQ:NFLX), Robinhood Markets, Inc. (NASDAQ:HOOD) is a significant pandemic stock that has plummeted over the last few months.
Here is what Claret Asset Management has to say about Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2021 investor letter:
“Robinhood went public at $38 a share at the end of July of this year. After a one day decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that the company does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, it is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
9. Wix.com Ltd. (NASDAQ:WIX)
Number of Hedge Fund Holders: 29
Loss in Share Price Over 6 Months as of March 1: 62.38%
Wix.com Ltd. (NASDAQ:WIX) operates and markets an on-demand platform that allows users to develop a website or web application. The company’s customers are located across North America, Europe, Latin America, and Asia. Wix.com Ltd. (NASDAQ:WIX) also enables e-commerce, marketing, and email marketing plug-ins for customers.
Wix.com Ltd. (NASDAQ:WIX) helps small businesses build and operate websites, which allowed it to gain popularity amid the COVID-19 pandemic, as small companies and mom-and-pop shops took their operations online. However, due to a period of heightened volatility post-pandemic, the company declined to announce annual guidance for bookings, revenue, and free cash flow. In Q4 2021, Wix.com Ltd. (NASDAQ:WIX) reported net losses and revenue missed consensus estimates.
Atlantic Equities analyst Kunaal Malde downgraded Wix.com Ltd. (NASDAQ:WIX) on March 1 to Neutral from Overweight with a $100 price target.
According to the Q4 database of Insider Monkey, 29 hedge funds held long positions in Wix.com Ltd. (NASDAQ:WIX), up from 25 funds in the preceding quarter. Steadfast Capital Management is the largest stakeholder of the company, with 1.6 million shares worth $265.6 million.
Here is what Baron Asset Fund has to say about Wix.com Ltd. (NASDAQ:WIX) in its Q4 2021 investor letter:
“Wix.com Ltd. (NASDAQ:WIX) is a leading provider of software that small companies utilize to build and operate their websites. Despite encouraging quarterly results that reflected a recovery in new customer additions following the summer slowdown, the company’s shares fell as investors continued to rotate out of e-commerce and cloud companies. We retain conviction in Wix’s long-term opportunity as it serves a large addressable market (small businesses seeking a web presence) with leading product solutions and an attractive, subscription-based revenue model.”
8. Novavax, Inc. (NASDAQ:NVAX)
Number of Hedge Fund Holders: 30
Loss in Share Price Over 6 Months as of March 1: 67.67%
Novavax, Inc. (NASDAQ:NVAX) is a Maryland-based biotechnology company that develops vaccines for infectious diseases. The company also created a vaccine for COVID-19, which is ranked as the fifth globally accepted vaccine, following Pfizer, Moderna, Janssen, and AstraZeneca.
The stock is losing value, and shares dropped around 68% in the last six months, especially as the COVID-19 omicron variant hit and competitors like Pfizer and BioNTech have a huge head start over Novavax, Inc. (NASDAQ:NVAX). However, the company is working on creating vaccine variants to fight omicron.
On February 28, Novavax, Inc. (NASDAQ:NVAX) missed its Q4 2021 results on both the top and bottom lines, and shares traded approximately 7% lower in post-market trading. Novavax, Inc. (NASDAQ:NVAX) was hurt in the fourth quarter by a major increase in R&D expenses. They rose 140% to roughly $963 million compared to the prior-year quarter.
Riley analyst Mayank Mamtani lowered the price target on Novavax, Inc. (NASDAQ:NVAX) on March 2 to $250 from $265. According to the analyst, the Q4 print notably had FY22 revenue guidance, for the first time in the company’s history, of $4 billion-$5 billion, the midpoint of which came in ahead of expectations.
A total of 30 hedge funds were bullish on Novavax, Inc. (NASDAQ:NVAX) at the end of December 2021, down from 35 funds in the previous quarter. RA Capital Management is the largest shareholder of the company, with more than 2 million shares worth $300 million.
7. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 34
Loss in Share Price Over 6 Months as of March 1: 61.49%
DraftKings Inc. (NASDAQ:DKNG) operates as a digital sports entertainment and gaming company in the United States, allowing users daily fantasy sports, sports betting, and iGaming opportunities. DraftKings Inc. (NASDAQ:DKNG) opened on February 18 with a 14.39% drop after the company’s below-consensus EBITDA guidance overshadowed a Q4 revenue beat.
The stock rose to prominence during the pandemic since people indulged in online betting and fantasy sports when they were forced to stay indoors. However, investors are concerned as DraftKings Inc. (NASDAQ:DKNG) spends excessively on sales, marketing, and expansion into new territories. The stock declined 61.49% over the last six months.
Citi analyst Jason Bazinet on February 23 lowered the price target on DraftKings Inc. (NASDAQ:DKNG) to $35 from $40 and kept a Buy rating on the shares following the Q4 results. The change in the target price reflects slightly more active accounts but a lower enterprise value per account, the analyst told investors in a research note. He continues to view DraftKings Inc. (NASDAQ:DKNG) as a leading operator in the “fast-growing” U.S. betting market.
Joseph Ravitch and Jeffrey Sine’s Raine Capital is the biggest stakeholder of DraftKings Inc. (NASDAQ:DKNG) as of Q4 2021, with 11.2 million shares worth over $308 million. Overall, 34 hedge funds were bullish on the stock at the end of December 2021.
Here is what Baron Small Cap Fund has to say about DraftKings Inc. (NASDAQ:DKNG) in its Q4 2021 investor letter:
“Shares of DraftKings Inc. (NASDAQ:DKNG) fell in the quarter, as stocks of online gaming companies were under pressure. Sports betting and i-gaming are rolling out with great fanfare and success across the country; however, investors seem concerned about competition and margins. Most participants are spending heavily on marketing and promotions, which is cutting into margins. We see this as a worthy investment in customer acquisition at a moment in time when revenues are just building. We continue to believe that online sports betting and gaming will be enormous industries, and that DraftKings Inc. (NASDAQ:DKNG) will be a leading player. We think the business will have high margins as it matures. We believe we are underwriting the business conservatively and see much upside in the long term.”
6. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 39
Loss in Share Price Over 6 Months as of March 1: 48.98%
Teladoc Health, Inc. (NYSE:TDOC) is an American virtual healthcare services firm that rose to the limelight during the pandemic, when patients were advised to stay home unless their illness required immediate medical attention.
Teladoc Health, Inc. (NYSE:TDOC) has declined close to 49% in the last six months and the company experienced slower sales growth, with people venturing out of their homes instead of opting for a virtual healthcare provider as the pandemic has slowed in severity and the infection rate has dropped.
On March 2, Deutsche Bank analyst George Hill stated that Teladoc Health, Inc. (NYSE:TDOC)’s partnership with Amazon is a “very modest win” for Teladoc Health, Inc. (NYSE:TDOC). Patients who use the Amazon devices will be directed to the Teladoc Health, Inc. (NYSE:TDOC) service, and will then have to follow the Teladoc Health, Inc. (NYSE:TDOC) process of registration or enrollment before seeing a provider, Hill told investors in a research note. He kept a Hold rating on Teladoc Health, Inc. (NYSE:TDOC) shares.
In the fourth quarter of 2021, 39 hedge funds were bullish on Teladoc Health, Inc. (NYSE:TDOC), down from 40 funds in the prior quarter. Renaissance Technologies is a prominent shareholder of the company, with a $121.5 million position.
Teladoc Health, Inc. (NYSE:TDOC) declined significantly over the last few months as the pandemic has relatively subsided, just like Moderna, Inc. (NASDAQ:MRNA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Netflix, Inc. (NASDAQ:NFLX).
Here is what Greenhaven Road Capital has to say about Teladoc Health, Inc (NYSE:TDOC) in its Q4 2021 investor letter:
“Teladoc Health (TDOC) – I agree with the common sentiment that we have seen the end of the tailwinds many companies enjoyed due to the massive customer behavior changes necessitated by staying home. Shares of “Covid beneficiaries” have sold off dramatically as a result. The share price of Teladoc Health (TDOC) is down >75% and instead of selling for 20X revenues, they are trading for less than 5X revenues.
What do we get at this reduced price? For starters, unlike many other “Covid beneficiaries,” Teladoc still expects to grow 25-30% per year for the next three years, regardless of progress to a more normalized environment. Is this plausible? For starters, management pre-announced revenues and reaffirmed their projections at the JPMorgan healthcare conference after their big selling season was complete, so there are indications that the company continues to believe. More importantly, the path to continued growth is primarily from selling additional products to existing customers. Over the past ten years,
Teladoc has evolved from being a Zoom solution for doctors to a much broader swath of comprehensive service offerings, including the delivery of mental healthcare, the monitoring of chronic conditions, lab testing, and specialist referrals. Teladoc is a telehealth provider that benefits from a large number of offerings as well as a broad geographic footprint in the U.S. and internationally. This scale enables it to provide a comprehensive solution for a health plan or a company making selections for large groups of patients. The benefits of scale are also realized on the development/product front, where there is a large base of 76M end customers to spread investments across. The net result of their product breadth and technology investments is that the company can provide “whole person care” on a purpose-built technology platform…” (Click here to see the full text)
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Disclosure: None. 10 Pandemic Stocks That Are Losing Value is originally published on Insider Monkey.
