Layoffs. Losses. Falling share price. These pandemic winners are now fighting

As people couldn’t (or didn’t want to) go to the gym, consumers rushed to buy machines and, more importantly, sign up for online classes. Peloton posted its first quarterly profit for calendar year 2020, with revenue up 139% and shares up 434%.

The rise was short-lived. As gyms reopened and inventory and season ticket sales plummeted, the company’s prospects grew.

On Thursday, after reporting a bigger-than-expected fiscal fourth quarter loss, Peloton CEO Barry McCarthy wrote in a letter to investors that “skeptics will look at our fourth quarter financials and see a melting pot of lower revenue, negative gross margin and more deep operating losses. They will say it threatens the viability of the business.”

McCarthy, however, sees great promise for the company despite its woes, arguing that Peloton has made significant progress in its recovery efforts and curbing its cash burn rate.

Investors do not share his faith. The stock has lost over 90% of its value since the end of 2020 and is now worth less than half of what it was at the beginning of that year.

The peloton is hardly the only pandemic winner to have recently turned into a post-pandemic loser. Many companies that have convinced themselves — and investors — that they are well positioned to continue growing after Covid recedes have been proven wrong.

Here are some other 2020 stilettos that are no longer needed in 2022.

Wafer

The pandemic has forced people to stay at home and, in millions of cases, to start working from there. Many have used the money they saved by not commuting or taking vacations to buy furniture and other items to decorate their homes.

This binge buying household goods has come to an abrupt halt. Consumers have shifted their shopping priorities, especially as skyrocketing prices for essentials such as groceries and gasoline have forced many households to cut back on non-essential items. Now, any such purchases are likely to be related to long-delayed travel plans, rather than other things.
The shift in spending has affected a wide range of retailers, including giants like Walmart and Target. But perhaps the epitome of companies experiencing this shift is online home goods retailer Wayfair, which just announced it was cutting 5% of its workforce. In making the announcement, the CEO admitted that the company was too optimistic about its continued growth potential.

“We have significantly expanded Wayfair to keep pace with the growth of e-commerce in the home goods category. We have seen the tailwind of the pandemic accelerate the adoption of e-commerce shopping, and I personally pushed for a strong support team to be hired. this growth,” CEO Niraj Shah said in a letter to employees announcing the layoffs. “This year, this growth did not happen as we expected. Our team is too big for the conditions we are currently in and unfortunately we have to adapt.”

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

Wayfair stock, which rose 482% between the end of March 2020 and the end of March 2021, has essentially lost all of those gains.

Shopify

A Canadian software company that helps retailers sell online also benefited when companies 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 “hadn’t paid 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 Toby Lütke wrote in a memo to employees announcing the layoffs.

Company before Covid E-commerce growth was strong and predictable, but there was an unforeseen surge in sales in the early days of the pandemic, he said.

“Was this surge a temporary effect or the new normal? So, given what we’ve seen, we’ve made another bet: we bet that the mix of channels – the proportion of dollars that go through e-commerce as opposed to retail – will constantly jump ahead by five or even 10 years.” , – he said. “At the time, we couldn’t know for sure, but we knew that if it were true, we would have to expand the company to fit.”

The good times didn’t evaporate as quickly as some of the other pandemic winners. But, of course, they retreated.

While revenue grew 18% in the first six months of the year compared to the previous year, Shopify’s spending, including research and development, has almost doubled. The company also posted a $1 billion paper loss on its equity investment in the second quarter, pushing its net loss for the period to $2.7 billion from a $2.1 billion profit a year earlier.

The company’s shares continued to rise until 2021, but this year they have fallen by 75%.

Increase

The online meeting platform is not facing the same challenges as some of the other former pandemic winners. Millions of people still work remotely, at least part of the time, and Increase (ZM) is still profitable. But profits fell 71% in the first half of this year due to increased costs. The company beats earnings forecasts, and its share price is still slightly above pre-pandemic levels.
Zoom reported weaker-than-expected earnings this week and issued a forecast that disappointed investors, sending the stock down 17% on the day the company reported results.

For the year, Zoom shares are down 56% and down 86% from their peak at the end of October 2020, when the pandemic was rampant and no vaccines were widely available.

Some of the blame for the drop can be placed on investors who got ahead of themselves and pushed the stock price up 765% between the end of 2019 and its peak 10 months later.

In addition, every good news about the fight against Covid was taken by Zoom as bad news, with shares down 25% in two days after news of Pfizer’s success in Covid vaccine clinical trials in November 2020.

Netflix

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

With such a composition Netflix (NFLKS) shares are up 21% during 2019 and revenue is up 28%. Within a year, the service added 27 million subscribers worldwide.
But things really got better with quarantine due to the pandemic. Netflix added 16 million subscribers in the first three months of 2020 and surpassed 200 million subscribers for the first time by the end of the year.

Shares of Netflix have also surged, more than doubling since the start of 2020 to a record high of $691.69 in November 2021.

But the competition has grown. In the first quarter the company lost 200,000 global subscribers this year, the first drop in subscribers in a decade, and nowhere near the 2.5 million it had previously predicted. It lost another 970,000 in the second quarter.

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

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