Layoffs. Losses. Stock price crash. These pandemic winners are now fighting

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

The impulse was short-lived. As gyms reopened and class subscriptions and equipment sales plummeted, so did the company’s outlook.

On Thursday, after posting a worse-than-expected fiscal fourth-quarter loss, 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 diminishing earnings.” , negative gross margin and operating losses. They will say they threaten the viability of the business.”

McCarthy, however, sees great things ahead for the company despite its troubles, saying Peloton has made significant progress in its turnaround efforts and has slowed its rate of cash burn.

Investors do not share his faith. The shares 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 beginning of that year.

Peloton isn’t the only pandemic winner to recently become a post-pandemic loser. Numerous companies that convinced themselves, and investors, that they were well positioned to continue to grow once Covid receded, have been proven wrong.

Here are some other 2020 stallions who have become busts in 2022.

fair way

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

That housewares shopping spree has stopped. Consumers have shifted their purchasing priorities, especially amid skyrocketing prices for essential items like 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 delayed travel plans rather than more stuff.
The shift in spending has hit a wide range of retailers, including giants like Walmart and Target. But perhaps the best example of companies reeling from this change is online home goods retailer Wayfair, which has just announced that it will cut 5% of its staff. In making the announcement, the CEO admitted that the company had been too optimistic about its continued growth potential.

“We’ve grown Wayfair significantly to keep pace with the growth of e-commerce in the home goods category. We saw the tailwinds of the pandemic accelerate the adoption of e-commerce shopping, and I personally pushed hard to hire a strong team to support that growth,” CEO Niraj Shah said in a letter to staff announcing the layoffs. “This year, that growth hasn’t materialized as we had anticipated. Our team is too big for the environment we’re in right now and unfortunately we have to adjust.”

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It’s not just that the company isn’t growing as fast as it used to. Like Peloton, Wayfair has switched to reverse gear and red ink. Revenue in 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 shares, which soared 482% between the end of March 2020 and the end of March 2021, have essentially given up all of those gains.

Shopify

The Canadian software firm that helps retailers sell online was also a big winner when businesses were forced to move to e-commerce due to the pandemic. Last month, its founder and CEO announced that Shopify was cutting 10% of its staff because its continued growth “wasn’t paying off.”

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

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

“Was this increase going to be a temporary effect or a new normal? So, given what we saw, we made another bet: We bet that the mix of channels, the part of the dollars that travel through e-commerce instead of the physical retail, take a permanent jump of five or even 10 years,” he said. “We couldn’t be sure at the time, but we knew that if there was a chance this was true, we would have to expand the company to match it.”

The good times didn’t evaporate as quickly as they did for some of the other pandemic winners. But they have certainly regressed.

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

Shares of the company continued to hold up through 2021, but are down 75% year-to-date.

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zoom

The online meeting platform is not facing the same challenges as some of the other winners from the pandemic. Millions of people still work remotely, at least some of the time, and zoom (ZM) is still profitable. But profits have plummeted 71% in the first half of this year due to rising costs. The company has been beating earnings forecasts and its share price is still just above pre-pandemic levels.
Zoom reported weaker-than-expected earnings this week and provided an outlook that disappointed investors, sending shares down 17% on the day the company reported results.

For the year, Zoom shares fell 56% and 86% from their peak in late October 2020, when the pandemic was at its height and no vaccines were widely available.

Part of the blame for the drop can be attributed to investors, who jumped ahead and pushed the share price up 765% between the end of 2019 and its peak 10 months later.

Furthermore, all the good news about beating Covid was taken as bad news for Zoom: stocks plunged 25% in the two days after news of Pfizer’s success in clinical trials of a Covid vaccine in November 2019. 2020.

Netflix

Netflix was very successful long before anyone heard about Covid-19. Even in the face of increased streaming competition, the platform had a successful 2019, as two original films, Martin Scorsese’s “The Irishman” and Noah Baumbach’s “Marriage Story,” attracted both viewership and best picture nominations. . “The Crown” returned for a third season with a new cast.

With that lineup, Netflix (NFLX) the stock gained 21% over the course of 2019 as its revenue jumped 28%. The service added 27 million subscribers globally during the year.
The streaming wars are over
But things really kicked into high gear with the pandemic lockdowns. Netflix added 16 million subscribers in the first three months of 2020 and ended the year surpassing 200 million subscribers for the first time.

Netflix shares have also soared, more than doubling in value since the beginning of 2020 to a record high of $691.69 in November 2021.

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

The company has also been losing support from investors. Netflix shares have lost almost two-thirds of their value so far this year, though they have recovered from a 12-month low in May, when investors braced for even bigger subscriber losses.

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