Investors dump favorite stocks during the pandemic and point to normal

Netflix, the market star during the lockdowns, slumped on Friday adding to a broad decline this week in the market value of other stock favorites during the lockdown. pandemic, as investors eyed a possible return to normal as more countries gradually ease restrictions over the COVID-19.

The sell-off, which began after Netflix and Peloton reported disappointing quarterly results, spread to the broader sector of favorite stocks during lockdowns, as analysts estimated that the omicron variant of the coronavirus will not present the same economic obstacles as the first. phase of the pandemic in 2020.

“This is a confirmation that the economy is gradually moving towards a kind of normalization,” said Andrea Cicione, chief strategy officer at TS Lombard.

“What we find very interesting is that omicron, due to its very high infectivity, very low mortality compared to previous waves such as the delta variant, could actually be the first tangible sign that the pandemic is evolving in the direction we all expected. , that is, it would become a manageable endemic disease like the flu.”

Peloton shares lost nearly $2.5 billion in value during the Asian session, about a quarter of its market capitalization, after the bikemaker’s chief executive said it is reviewing its workforce size and “ adjusting” production levels.

France will relax rules on working from home from early February and allow nightspots to reopen two weeks later. People should return to the office to benefit from in-person collaboration, Britain’s business minister said on Friday.

For its part, Netflix shares plunged almost 20% after forecasting that the growth of new subscribers in the first quarter would be less than half of analysts’ forecasts.

Shares fell 20% in pre-session trading to their lowest level in 21 months.

Home delivery

Both companies were part of a group, along with others like Zoom and Docusign, whose shares soared in 2020, and in some cases also in 2021, when people around the world were forced to stay home in the face of the spread of the coronavirus.

But thanks to the spread of vaccines and the omicron variant of COVID-19 causing fewer serious illnesses, life is returning to something close to normal in many countries, leaving companies like Netflix and Peloton struggling to maintain high sales figures.

According to data from S3 Partners, short sellers doubled their profits by betting against Peloton in 2021, which ranked third among the best performing US short bets.

“With the return to the office and the opening of travel, WFH-themed favorites are reflecting the growing reality that the world is moving slowly but surely toward a new normal” said Justin Tang, head of Asian research at United First Partners in Singapore.

Direxion’s Work from Home exchange-traded fund (ETF) has fallen more than 9% in the first three weeks of the year, compared with a 6% drop in the broader US stock market. Blackrock’s Work and Life virtual multi-sector ETF has weakened more than 8% this year.

In Europe, lockdown winners are also having a rough patch as easing omicron-related fears add to the strain rising bond yields are putting on growth and tech stocks.

UK online supermarket group Ocado, German food parcel delivery company HelloFresh and food delivery company Delivery Hero, which were European champions during lockdowns in the early days of the pandemic, have all underperformed. to that of the STOXX 600 so far in 2022.