Investors in Pinterest (PINS -0.99%), Shopify (SHOP -7.02%), Wix.com (WIX -1.91%), and Square (SQ -4.25%) are having a tough start to the week. Shares of all four of these tech stocks declined by double digits on Monday. Pinterest dropped 12%, Shopify slumped 11%, Square fell 10%, and Wix.com plunged 15%.
All four of these growth stocks sharply declined, but there doesn't appear to be any company-specific news that could justify the huge moves. None of these businesses issued a press release or SEC filing today, and none of them were on the receiving end of an analyst downgrade, either.
The lack of news suggests that all of these stocks simply got caught up in the market plunge today that was triggered by the continued spread of the coronavirus and the chaos in the global oil markets.
While it's tough to predict whether or not those macro developments will impact any of these companies' prospects moving forward, Wall Street probably knocked down shares of all four of these growth stocks harder than most for two main reasons:
- They all trade at high valuations, which tends to make their stocks more volatile than the average businesses.
- They all cater to the needs of small businesses, which may have a harder time absorbing the impact of a global economic shock.
It's never fun to see companies that you own take a big hit for no reason. During times like this, it can be helpful to look back on the companies' recent performance to make sure that your thesis for owning them is still on track.
Pinterest recently reported great quarterly earnings. The "visual search engine" posted revenue growth of 46% and came in with much higher adjusted profits than were expected. Management also guided for 2020 to be another year of strong growth for the business.
Shopify also wowed investors when it reported its fourth-quarter results in February. The provider of e-commerce tools for small businesses posted revenue growth of 47% to $482 million, which beat Wall Street's estimates and management's guidance. The company also reported a surprise profit and gave guidance for 2020 that surpassed the consensus estimate in the analyst community.
It was a simliar story for Wix.com. The maker of easy-to-use website-building tools posted revenue growth of 25% to $205 million. While adjusted profits took a step back due to expense growth, management stated that they expect to grow the top line at least 24% in 2020.
Square also remains in high-growth mode as well. The company's revenue jumped 41% in the most recent quarter, and its bottom line flipped to profitability. For 2020, management guided for revenue to grow at least 30% to a range of $2.440 billion to $2.475 billion.
These results showcase that all four of these growth stocks are executing at a high level. While there's no telling how these businesses might be impacted by the continued spread of the coronavirus, investors do have reason to believe that the bull case for owning them remains on track.
In other words, if you believed in these companies' long-term potential yesterday, I see no reason to change your tune just because of today's drubbing.