In this article, we discuss 5 pandemic stocks that are losing value. If you want our detailed analysis of these stocks, go directly to 10 Pandemic Stocks That Are Losing Value.
5. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 43
Loss in Share Price Over 6 Months as of March 1: 62.40%
Moderna, Inc. (NASDAQ:MRNA) is a biotechnology company that creates therapeutics and vaccines to treat infectious and rare diseases, immuno-oncology, cardiovascular diseases, and autoimmune diseases. The stock exploded when Moderna, Inc. (NASDAQ:MRNA) created the COVID-19 vaccine that became one of the four WHO approved vaccines for the pandemic.
Moderna, Inc. (NASDAQ:MRNA) significantly declined in the last few months owing to the broad sell-off in growth stocks, and investors believe that the company has run its course with the COVID-19 vaccine gains. The stock also lost value when the U.S. Supreme Court ruled that the vaccine mandate for large companies by the Biden administration was unconstitutional.
Despite the stock underperforming over the last six months, Moderna, Inc. (NASDAQ:MRNA) reported above consensus earnings and revenue for the quarter ending December 2021. In Q4, 43 hedge funds were bullish on Moderna, Inc. (NASDAQ:MRNA), down from 49 funds in the prior quarter. Theleme Partners held the biggest stake in the company, with more than 5 million shares worth $1.27 billion.
Here is what Carillon Tower Advisers has to say about Moderna, Inc. (NASDAQ:MRNA) in its Q3 2021 investor letter:
“Moderna is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines. The stock proved to be an impressive contributor once again in the quarter, as investors continue to evaluate the potential for future growth driven primarily by the firm’s revolutionary COVID-19 vaccine. Strong global demand for the vaccine may persist for the foreseeable future in order to maintain immunity as well as provide protection against any additional future variants. The potential for the firm’s mRNA technology to be used in a number of other use cases, specifically influenza, could also provide an additional tailwind for future growth.”
4. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 48
Loss in Share Price Over 6 Months as of March 1: 58.39%
Zoom Video Communications, Inc. (NASDAQ:ZM) is a California-based technology company that provides a video-first communications platform to customers worldwide. The pandemic pushed the stock price to almost $600 per share, as work, education, and social life was conducted virtually via Zoom Video Communications, Inc. (NASDAQ:ZM) during nationwide lockdowns.
Zoom Video Communications (NASDAQ:ZM) shares slipped by 1.5% in pre-market trading on March 1 as analysts weighed in on the company’s fourth-quarter results and slightly disappointing sales outlook. The company expects full-year sales to be between $4.53 billion and $4.55 billion, while Wall Street was looking for revenue of $4.75 billion. As the pandemic has eased and lockdowns are lifted worldwide, Zoom Video Communications (NASDAQ:ZM) has failed to maintain interest from investors as the stock has fallen to pre-COVID valuation levels, despite the continued business growth.
On March 2, Barclays analyst Ryan MacWilliams lowered the price target on Zoom Video Communications (NASDAQ:ZM) to $150 from $245 and kept an Equal Weight rating on the shares.
A total of 48 hedge funds were long Zoom Video Communications (NASDAQ:ZM) in Q4 2021, down from 56 funds in the quarter earlier. ARK Investment Management held the biggest stake in the company, owning close to 7 million shares worth $1.26 billion.
Here is what Artisan Partners has to say about Zoom Video Communications, Inc. (NASDAQ:ZM) in its Q1 2021 investor letter:
“We concluded our campaigns in Zoom Video Communications. We have been paring our position in Zoom for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in video conferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”
3. DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Holders: 49
Loss in Share Price Over 6 Months as of March 1: 59.98%
DocuSign, Inc. (NASDAQ:DOCU) is a California-based company that provides e-signature solutions, allowing businesses and individuals to digitally prepare and sign agreements. The stock gained significant traction during the pandemic, when companies conducted a majority of their business online and utilized DocuSign, Inc. (NASDAQ:DOCU)’s services to manage contracts.
DocuSign, Inc. (NASDAQ:DOCU) declined almost 60% in value over the last six months. Investors sold the stock in December as Q3 results missed expectations, with guidance for Q4 also missing estimates, indicating that the COVID-19 boom for the company was over, since the remote working trend is slowing after lockdowns are lifted. DocuSign, Inc. (NASDAQ:DOCU) has also dropped due to the broader sell-off in SaaS stocks, as investors lower exposure to high growth stocks amid rising rates and a tighter monetary policy.
Morgan Stanley analyst Stan Zlotsky downgraded DocuSign, Inc. (NASDAQ:DOCU) on December 16 to Equal Weight from Overweight with a price target of $165, down from $350. The company’s Q3 results altered his thesis around the durability of growth amid tough comps post-COVID, said Zlotsky, who thinks it will likely take time to refocus on the pre-pandemic basics of selling, build the pipeline, and convert that into growth. The company’s management is also conservative on its Q4 and 2022 guidance.
According to the Q4 database of Insider Monkey, 49 hedge funds were bullish on DocuSign, Inc. (NASDAQ:DOCU), down from 51 funds in the previous quarter. Tiger Global Management is the largest stakeholder of the company, with approximately 7 million shares worth more than $1 billion.
Here is what Polen Focus Growth has to say about DocuSign, Inc. (NASDAQ:DOCU) in its Q4 2021 investor letter:
“We opportunistically purchased a new position in DocuSign amid what we believe is a short-term execution issue. DocuSign dominates the market for electronic signatures and is expanding into adjacent areas like contract lifecycle management, AI-based contract analysis, and e-notary services.
It has 1.1 million customers, including over 160,000 large enterprise and commercial customers. DocuSign’s business consists of almost entirely subscription-based revenue with over 120% net revenue retention rates currently. The business is also profitable and cash generative.
DocuSign has over 350 pre-built integrations with many of the most important software applications from Microsoft, Salesforce.com, Workday, and many others. Their e-signature product is embedded into applications that people use every day. E-signatures were already beginning to replace “wet” signatures pre-COVID but substantially accelerated as workforces became mostly remote in 2020. Once businesses move to e-signatures, they typically do not go back.”
2. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 60
Loss in Share Price Over 6 Months as of March 1: 72.65%
Peloton Interactive, Inc. (NASDAQ:PTON) is a New York-based company that provides interactive fitness products to customers across North America and internationally. The stock hit market highs during the pandemic, as lockdowns and closed gyms pushed more individuals towards physical health, and demand for Peloton Interactive, Inc. (NASDAQ:PTON)’s at-home fitness equipment grew exponentially.
The company’s market value rose to a record high of $49.3 billion in December 2020, but it has since plummeted to around $8.5 billion in January 2022. To meet the pandemic-driven demand, Peloton Interactive, Inc. (NASDAQ:PTON) invested in a new production space worth $400 million, but as gyms and social establishments reopened, the company experienced abundant supply but low demand. Adding to that, the recent supply chain challenges and the exceedingly slow delivery times are turning away potential buyers.
The company also suffered when it had to recall equipment in May and November after several injury complaints surfaced and Peloton Interactive, Inc. (NASDAQ:PTON) received bad PR from mainstream television shows. Resultantly, the stock dropped 72.65% over the past six months.
On February 10, MKM Partners analyst Rohit Kulkarni raised the price target on Peloton Interactive, Inc. (NASDAQ:PTON) to $35 from $30 but kept a Neutral rating on the shares after its Q4 results, updated outlook, and announced management changes.
At the end of December 2021, 60 hedge funds were bullish on Peloton Interactive, Inc. (NASDAQ:PTON), down from 62 funds in the quarter prior. Durable Capital Partners is a notable shareholder of the company, with 5.4 million shares worth $194.3 million.
Here is what Artisan Mid Cap Fund has to say about Peloton Interactive, Inc. (NASDAQ:PTON) in its Q4 2021 investor letter:
“We ended our campaigns in Peloton. Peloton is a connected fitness franchise known for its stationary exercise bikes that provide live and on-demand cycling classes. When we trimmed our position in 1Q21, we believed the stock’s valuation was reflecting relatively aggressive assumptions about post-pandemic membership growth. However, we underestimated just how much growth would slow by midyear. A seemingly slow launch of the new Peloton treadmill combined with meaningful price cuts on the bike are erasing the company’s margin progress of 2020, resulting in meaningful short-term losses. While we remain optimistic about the company’s long-term potential, we harvested our position given the negative profit cycle dynamics.”
1. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 113
Loss in Share Price Over 6 Months as of March 1: 34.37%
Netflix, Inc. (NASDAQ:NFLX) is a digital streaming company that also owns an original production house. The stock gained tremendously during the pandemic when cinemas, entertainment establishments, and outdoor spaces closed and people were forced to stay indoors.
Netflix, Inc. (NASDAQ:NFLX) is an “at-home stock” that recently suffered from disappointing subscriber figures, as disclosed in its Q4 earnings report, and stay-at-home stocks are suffering a correction much like the Nasdaq as a whole. The company said it expects to add just 2.5 million subscribers in the first quarter of 2022, way below the 6.93 million that analysts expected.
On February 18, JPMorgan analyst Doug Anmuth said that Netflix, Inc. (NASDAQ:NFLX) shares “remain controversial” as the in-line Q4 subscribers and “light” Q1 outlook are driving lower growth expectations and increased questions around subscriber penetration, the impact of content, and competition. He reiterated an Overweight rating on the shares with a $605 price target but cautions that the potential subscriber impact from the recent price increase “may lie ahead”.
According to the fourth quarter database of Insider Monkey, 113 hedge funds were long Netflix, Inc. (NASDAQ:NFLX), up from 106 funds in the quarter earlier. Fisher Asset Management is the biggest stakeholder of the company, with 5.4 million shares worth $3.2 billion.
Here is what Pershing Square Capital Management has to say about Netflix, Inc. (NASDAQ:NFLX) in its Q4 2021 investor letter:
“Amidst a volatile market backdrop in 2022, hedging gains provided the capital to fund the purchase of Netflix. World’s leading streaming subscription video-on-demand company. Launched its category-pioneering streaming service in 2007. 222 million global paid subscribers in over 190 countries today. Vast and diverse library of high-quality content. Most Emmy-winning and Oscar-winning TV network / studio of 2021. Industry-leading volume of original content episodes released per quarter. High-performance culture led by a visionary management team. Subscription-based, highly recurring revenues. 26% annual streaming revenue growth and ~360 bps of average annual EBIT margin expansion over the last three years. Modest financial leverage (1.5x Net Debt / EBITDA)…” (Click here to see the full text)
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