Layoffs. Losses. Plunging share price. These pandemic winners are now struggling

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With people unable (or unwilling) to go to the gym, consumers rushed to buy the fitness equipment and, most importantly, sign up for the online classes. Peloton posted its first quarterly profit in calendar year 2020, when sales rose 139% and stock rose 434%.

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

Thursday, after posting a worse-than-expected fiscal loss in the fourth quarter, Peloton CEO Barry McCarthy wrote in a letter to investors that “naysayers will be looking at our fourth quarter financial performance and a melting pot of declining revenues, negative gross margin and deeper operating losses. They will say these threaten the viability of the business.”

However, McCarthy sees big things ahead for the company despite its woes, claiming that Peloton has made significant progress in its turnaround and has slowed down the pace of cash burnout.

Investors do not share his faith. Stocks have lost more than 90% of their value since the end of 2020 and are now worth less than half of what they were at the beginning of that year.

Peloton isn’t the only pandemic winner to become a post-pandemic loser recently. Numerous companies that convinced themselves – and investors – that they were well positioned to continue growing once Covid pulled out are wrong.

Here are some other 2020 studs who have become duds in 2022.

way fair

The pandemic forced people to stay at home and in millions of cases to work from there. Many took the money they saved by not commuting or going on vacation to buy furniture and other items to brighten up their homes.

That binge with buying household items has stalled. Consumers have shifted their purchasing priorities, especially amid skyrocketing prices for basic necessities like food and gasoline, forcing many households to cut back on non-essential purchases. Now, such purchases are more for things like long-delayed travel plans than for more stuff.
The shift in spending has affected a wide range of retailers, including giants like Walmart and Target. But perhaps the billboard for businesses reeling from this shift is online homewares retailer Wayfair, which just announced it will be cutting 5% of its workforce. In making the announcement, the CEO admitted that the company was far too optimistic about its continued growth potential.

“We’ve grown Wayfair significantly to keep up with the growth of e-commerce in the home category. We’ve seen the tailwind of the pandemic accelerate the adoption of e-commerce shopping, and I personally pushed hard to have a strong team to support that growth,” CEO Niraj Shah said in a letter to staff announcing the layoffs. “This year, that growth has not materialized as we expected. Our team is too big for the environment we are in now and unfortunately we have to adapt.”

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

Shopify

The Canadian software company that helps retailers sell online was also a big winner as companies were forced to switch to e-commerce due to the pandemic. Last month, the founder and CEO announced that Shopify was cutting 10% of its workforce because continued growth “didn’t pay off”.

“Shopify has always been a company that takes the big strategic bets that our salespeople demand of us – this is how we succeed,” CEO Tobi Lutke wrote in a memo to staff announcing the layoffs.

The company’s pre-Covid E-commerce growth was steady and predictable, he said, but the early days of the pandemic brought an unprecedented spike in sales.

“Was this increase a temporary effect or a new normal? And so, given what we saw, we placed another bet: We bet the channel mix — the proportion of dollars going through e-commerce rather than physical retail — would remain five years old. or even jump ten years ahead,” he said. “We couldn’t know for sure at the time, but we knew that if there was a chance this would be true, we’d have to expand the business to match it.”

The good times didn’t evaporate as quickly as with some of the other pandemic winners. But they have definitely deteriorated.

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

The company’s shares held up through 2021, but have fallen 75% so far this year.

Zoom

The online meeting platform does not face the same challenges as some of the other former pandemic winners. Millions of people are still working remotely, at least some of the time, and Zoom (ZM) is still profitable. But profits fell 71% in the first half of this year due to increased costs. The company has beaten earnings forecasts and its share price is still just above pre-pandemic levels.
Zoom reported weaker-than-expected earnings this week and provided a prospect that disappointed investors, pushing shares down 17% on the day the company reported results.

For the year, Zoom stocks are down 56% and down 86% since their peak in late October 2020, when the pandemic raged and there were no widely available vaccines.

Some of the blame for the shift can be put at the feet of investors, who took the lead and the stock’s price rose 765% between the end of 2019 and its peak 10 months later.

Plus, any bit of good news about the Covid backlash was deemed bad news for Zoom: Shares fell 25% in the two days following news of Pfizer’s success in clinical trials for a Covid vaccine in November 2020.

Netflix

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

With that setup, Netflix (NFLX) stocks gained 21% over the course of 2019, while sales rose 28%. The service has added 27 million subscribers worldwide over the year.
The streaming wars are over
But with the pandemic lockdowns, it really took off. Netflix added 16 million subscribers in the first three months of 2020, finishing the year above 200 million for the first time.

Netflix shares also skyrocketed, more than doubling in value from the start of 2020 to a record high of $691.69 in November 2021.

But competition has increased. In the first quarter this year, the company lost 200,000 subscribers worldwide, the first drop in subscribers in a decade, and nowhere near the 2.5 million profit it had previously forecast. In the second quarter, it lost another 970,000.

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

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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