Are Zoom, other stay-at-home stocks worth a second look?
Stay-at-home stocks soared in 2020 at the height of the pandemic but cooled off in 2021. Are they a buy now?
Once pandemic winners, stay-at-home stocks have taken a beating in 2021 as investors turn their attention to companies that will benefit from the reopening economy.
Will they get a second look as businesses delay return plans and Omicron surges?
What analysts say about the work-from-home trend and these stocks
Bleakley Advisory Group chief investment officer Peter Boockvar said Tuesday in an interview on CNBC's "Squawk Box" that the valuations for stay-at-home stocks like DocuSign (DOCU) and Zoom Video Communications (ZM) still need to adapt to a post-pandemic world.
"One of the things that COVID did with these companies is that it really brought them a huge audience much sooner than they probably anticipated and I think these companies now have to prove that they can sort of live in a more normalised world," Boockvar said. "I think those companies will adjust, but I think the multiples within them are still pretty heady and still need to adjust."
What a normalised world looks like is still being worked out, but it appears remote work, or at least a hybrid version of it, may become the new normal.
According to a recent report from workplace research and consulting firm Global Workplace Analytics and Owl Labs, more than 70% of respondents want a hybrid or remote working style post–pandemic. Only 39% of respondents said their employers are requiring them to be back in the office full-time.
So while stay-at-home stock favorites may have gone too high too quickly, we're now in the second winter of the coronavirus pandemic. Companies are rethinking plans to bring employees back to the workplace and countries are tightening restrictions as the Omicron variant surges around the globe.
The companies that benefited from the initial COVID-19 surge may find themselves again well-positioned to take advantage of what might be coming.
Stay-at-home stocks to watch
Keep an eye on following stay-at-home stocks as remote work normalizes.
Zoom Video Communications
Communications technology company Zoom rocketed more than 390% in 2020 as a result of the increase in remote work during the height of the COVID-19 pandemic. In mid-October 2020, the video conference platform peaked at a high of US$588.84 per share, a year-to-date gain of over 750%.
Today, Zoom returns have trailed off. The stock is down roughly 50% for 2021 and down around 60% from its 52-week high of US$451.77.
Closing out 2021, the company expects total revenue of up to US$4.081 billion. This is 54% higher than its total 2020 revenue.
Analysts see Zoom stock, now at about US$181, hitting a share price of US$321.53 over the coming 12 months, giving it a consensus Buy rating.
Shares of digital signature company DocuSign had more than quadrupled since the start of 2020 thanks to rapid customer growth and an increased retention of existing clients.
The stock peaked at US$314.76 in early August 2021 but plummeted by more than 40% on Dec. 3 on shifting customer behaviors and after the company gave fourth quarter guidance that fell short of analyst estimates. DocuSign is now trading at around 52% below its 52-week high and is down 31% year-to-date.
Looking ahead, analysts rate DocuSign stock a Buy and give it a price target of US$210.71, a 39% premium over its current price of about US$150.
Teladoc Health (TDOC)
Teladoc Health is a telemedicine and virtual healthcare company that saw strong growth in 2020 as a result of the pandemic driving people toward consulting with healthcare providers virtually rather than in office.
Shares of Teladoc Health soared more than 200% in 2020, hitting a high of US$253 in early August. The stock peaked at US$308 in mid-February 2021 ahead of the company's release of its fourth quarter 2020 financial results.
Today, Teladoc stock is trading just below US$90, around 71% below its 52-week high and down around 55% for the year. Analysts rate the stock a Buy and give it a US$158.52 price target, roughly 76% above its current price.
Peloton Interactive (PTON)
Interactive fitness platform and exercise equipment company Peloton saw explosive growth in 2020 as people embraced at-home workouts. Peloton's products were suited perfectly to serve the pandemic needs, as evidenced by the company's surge in digital subscriptions and connected fitness products through 2020.
Shares of Peloton soared more than 410% in 2020. The stock peaked at US$171.09 in January 2021 but has since lost around 76% of its value. The stock has gotten crushed this year on shifting demand trends as well as a recall, and the company lowered its full year 2022 guidance as a result.
Peloton now expects fiscal year 2022 revenue of up to US$4.8 billion, down from its original expectation of US$5.4 billion. Despite lowering its guidance, analysts see the stock reaching US$74.89 per share, a 116% premium over its current price, and give the stock a Buy.
Online education company Chegg also saw its stock more than triple in 2020, as demand skyrocketed among students learning remotely during the pandemic. Chegg's posted 2020 revenue of US$644.3 million, up 57% from 2019, and saw subscribers increase 67% year-over-year.
Shares of Chegg peaked at US$115.21 in mid-February 2021. In November, Chegg stock plunged 48% on lower revenue as a result of lower demand as students returned to the classroom. Chegg stock is down 66% for the year.
Chegg CEO Dan Rosensweig believes the slowdown in the education industry is temporary. Analysts give the stock a Buy and a price target of US$52.64.
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