Where are the Pandemic Winners Now? ZM, SHOP, PTON
A handful of stocks benefited massively during the pandemic. It was an interesting time to be an investor, to say the least, and those who targeted the stay-at-home stocks were rewarded handsomely with considerable gains.
A few of those stocks include Shopify SHOP, Zoom Video Communications ZM, and Peloton Interactive PTON.
But given their fades from peak popularity, are these former winners still worth investors’ attention? Let’s take a closer look.
Shopify's Growth Remains Robust
Shopify’s platform gained widespread attention during the period, particularly as consumers shifted to online shopping. SHOP shares have by far been the biggest winners of the bunch, up more than 120% over the last two years and widely outperforming relative to the S&P 500.
Image Source: Zacks Investment Research
Shares saw bullish activity following the release of its latest quarterly results in early August, with the company reporting 325% EPS growth on 20% higher sales. The company was firing on all cylinders throughout the period, seeing Gross Merchandise Volume (GMV) increase 22% year-over-year alongside a big boost to its free cash flow.
The company has regularly beaten our consensus expectations regarding GMV as of late, as shown below.
Image Source: Zacks Investment Research
The growth picture here is also rock-solid, with consensus expectations for its current fiscal year suggesting 51% EPS growth on 22% higher sales. Peeking ahead to FY25, expectations allude to an additional 18% climb in earnings paired with a 20% sales bump.
The stock sports a Style Score of ‘A’ for Growth.
Image Source: Zacks Investment Research
Zoom Shares Soar Post Earnings
Zoom Video Communications’ cloud-native unified communications platform combines video, audio, phone, screen sharing, and chat functionalities. It’s easy to understand why shares were so beloved during the period, as many were forced onto the platform.
While the stock is nowhere near its all-time highs, shares have gained a solid 16% over the last month, fueled by better-than-expected quarterly results.
Image Source: Zacks Investment Research
Concerning the above-mentioned release, Zoom saw a nice boost to its cash-generating abilities, posting free cash flow of $365 million that climbed 26% year-over-year. And the company has found success in landing lucrative customers, with Enterprise revenue climbing 4% from the same period last year.
As you can see in the chart below, sales exploded during the pandemic before leveling off over recent years.
Image Source: Zacks Investment Research
In addition, the company’s earnings outlook has brightened considerably following the latest set of results. The valuation picture here does look a bit rich, with the current 3.3X PEG ratio well above the 2.1X five-year median.
Image Source: Zacks Investment Research
Peloton Shares Finally Sees Positivity
Peloton shares have been hit the hardest out of the group, down 97% since making all-time highs back in January of 2021. Nonetheless, favorable revisions for its current fiscal year finally began hitting the tape back in early May, with the -$0.65 Zacks Consensus EPS estimate up 43% overall over the last year.
Image Source: Zacks Investment Research
The boost to estimates in early August followed its latest quarterly release, with the company exceeding its guidance on all key metrics and posting year-over-year revenue growth for the first time since Q2 FY22.
As shown below, sales have cratered post-pandemic, with the downward trend continuing since. The sales struggles have weighed heavily on shares, fully reflected by performance.
Image Source: Zacks Investment Research
Nonetheless, there have been several pockets of positivity for the company that hint things could be turning around, such as recently delivering positive adjusted EBITDA and free cash flow in back-to-back quarters for the first time since Q2 FY21.
Bottom Line
While stocks such as Shopify SHOP, Zoom Video Communications ZM, and Peloton Interactive PTON were all widely hailed during the pandemic, their performance since then has primarily left a sour taste in investors’ mouths.
All three remain well below all-time highs, though Shopify has been the true leader regarding overall performance. Zoom has traded sideways for months now, with the market seemingly awaiting any positive news to give the stock life again. Peloton is currently in a more concerning spot, primarily due to weak sales and shakeups within management.
Out of the bunch, Shopify shares reflect the most attractive opportunity given its forecasted growth.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Shopify Inc. (SHOP) : Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
Peloton Interactive, Inc. (PTON) : Free Stock Analysis Report