The worst performing tech shares this week counsel the US is thru with the Covid lockdown
Something funny happened on the way to the withdrawal of the stock exchange.
Stay-home stocks that benefited the most from Covid-19 and its resulting lockdowns, such as Etsy, DoorDash, Zoom and DocuSign, performed worst this week. It’s the opposite reaction one might expect as the new variant of Covid-Omicron, which the World Health Organization poses a “very high” global risk, is going around the world.
The heavy sell-off suggests that investors are betting that no matter what happens to omicron, the U.S. will be done with the shutdowns that spurred food delivery and streaming TV services, forcing people to remotely for work together and endlessly video chat with friends and family members.
Shares in pandemic favorite Zoom slumped 16.5% this week, hitting a new 52-week low at $ 177.12 per share on December 3, a 69% decline from their record high in October 2020. Shares in online marketplace Etsy, which became a haven for mask buyers at the start of the pandemic, fell 20.6% on the week, while grocery delivery DoorDash slumped 16%, Roku slumped 13%, Shopify slumped 10.5% and Netflix fell 9.5%.
E-signature software maker DocuSign, which tripled in value in the past year, was down 42% on Friday after the company’s poor fourth-quarter forecast indicated that “the pandemic tailwind is much faster than expected came to a standstill, ”JPMorgan analyst Sterling Auty wrote in a note to clients.
There has been a lot of anger across the tech sector. The Nasdaq Composite slumped more than 1.9% on Friday, down 2.6% this week in its fifth worst week of the year. A disappointing job report at the end of the week, coupled with Omicron concerns, fueled Friday’s downturn.
But some of the technology’s blue-chip names stood up to the pressure. Apple, HP and Cisco all made gains this week as investors looking to hedge against market volatility switched from riskier, high-security stocks to cash-generating companies that pay dividends.
Earlier this week, Federal Reserve Chairman Jerome Powell hinted that the central bank was so concerned about escalating inflationary pressures that it could start tapering its bond purchases to stimulate the economy.
After Powell’s remarks on Tuesday, Apple was the only tech stock to gain.
“There is an escape to quality in companies that you know will weather the storm, not bankrupt, not have financial hardship,” Needham analyst Laura Martin told CNBC.
Apple slipped on Friday but is still up more than 3% on the week. HP’s shares rose about 8% this week, hitting an all-time high on Friday. Enrique Lores, CEO of HP, said last week that the company expects robust demand for its PCs across all segments for the “foreseeable future”.
Cisco and Broadcom were up more than 2% this week, and Intel and Qualcomm were up less than 1%.
But for big chunks of tech, the market was a sea of red. Facebook, AMD, Adobe, and Tesla all fell more than 6% this week, while cloud software provider Asana, which was the best tech stock of the year, slumped 36.8% and Bill.com, another recent outperformer, slipped 21%.
Salesforce contributed its part to cloud concerns on Tuesday when the company released a weaker-than-expected forecast for the fourth quarter. The stock is down 9% this week.
“It was a wild one,” said Byron Deeter, a partner at Bessemer Venture Partners, which invests in cloud software, in an interview with CNBC’s TechCheck on Friday. “You can look at four causes. You can take a look at Omicron. You can look at inflation. You can look at the interest rates. And you can see the profit taking. “
However, Deeter is quick to point out what happened over the past year to skeptics.
“As a reminder, working from home is actually very good for cloud stocks,” said Deeter. Inflation could be a concern, he said, because “the downstream link with inflation could certainly cause a rotation in the valuation of stocks and cash stocks over time”.
SEE: Cloud stocks are likely to remain volatile