Please ensure Javascript is enabled for purposes of website accessibility

Why Pinterest, Shopify, Wix.com, and Square Dropped Today

By Brian Feroldi - Mar 9, 2020 at 4:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of all four of these tech companies dropped hard today. Were any of the moves justified?

What happened

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%.

So what

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.

Man in shirt and tie, slumped with head in hands, looking worried.

Image source: Getty Images.

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.

Now what

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wix.com Stock Quote
Wix.com
WIX
$67.35 (-1.91%) $-1.31
Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$363.85 (-7.02%) $-27.48
Block, Inc. Stock Quote
Block, Inc.
SQ
$83.44 (-4.25%) $-3.70
Pinterest Stock Quote
Pinterest
PINS
$22.91 (-0.99%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.