What happened
Shares of some high-flying tech stocks tumbled on Thursday as the COVID-19 coronavirus pandemic sparked a deep sell-off in the stock market. By 12:50 p.m. EDT, all the major U.S. indexes were down at least 8%.
Five stocks hit hard were MongoDB (MDB 2.13%), BlackBerry (BB 1.06%), Zscaler (ZS +1.35%), Sea Limited (SE 3.23%), and Splunk (SPLK +0.00%). Here's how they were doing by early afternoon:
|
Stock |
Change (Decline) |
|---|---|
|
MongoDB |
(10.6%) |
|
BlackBerry |
(10.2%) |
|
Zscaler |
(7.9%) |
|
Sea Limited |
(9.9%) |
|
Splunk |
(9.2%) |
Data source: Yahoo! Finance.
So what
Prior to the panic set off by the novel coronavirus outbreak over the past few weeks, four of these five stocks were up big over the past year. Between the start of 2019 and the end of January 2020, the gains for most of these stocks were impressive:
|
Stock |
Change (Decline) Jan. 1, 2019 to Jan. 31, 2020 |
|---|---|
|
MongoDB |
95.7% |
|
BlackBerry |
(14.2%) |
|
Zscaler |
43.1% |
|
Sea Limited |
299.6% |
|
Splunk |
48.1% |
Data source: YCharts.
Things took a turn last month when the stock market began to come under pressure. Since the end of January, most of these stocks are down substantially. Sea has lost less than 5%, but Zscaler, Splunk, and MongoDB have shed around 30%, and BlackBerry has lost nearly 40%.
The selling pressure has been largely due to the stock market sell-off, although lofty valuations may be playing a role. Even after slumping, MongoDB is still valued around $6.4 billion. With revenue of just $408.8 million expected by analysts this year, the stock's price-to-sales ratio is over 15. The company is scheduled to report its fourth-quarter results on March 17.
Image source: Getty Images.
BlackBerry is expensive relative to earnings. With adjusted EPS of $0.08 expected by analysts this year, the price-to-earnings ratio is roughly 47. The company's growth has been solid, with revenue up 23% in the fiscal third quarter, but that hasn't been enough to prevent a steep stock decline in the past few weeks.
While Zscaler stock is up over the past year, shares have been tumbling well before the coronavirus panic. The stock is now down about 54% from its 52-week high, which was reached in late 2019. A string of weak guidance from the company appears to have given investors second thoughts about its growth prospects. Most recently, Zscaler guided for third-quarter adjusted EPS between $0.01 and $0.03, below the analyst consensus of $0.04.
Sea Limited stock has seen the least impact from the market panic so far. Earlier this month, the company reported results that beat expectations across the board. Adjusted revenue was up 133.5% to $909.1 million, beating the average analyst estimate by $35 million. Adjusted EPS was a loss of $0.53, ahead of expectations by $0.05. The strong report may have helped the stock stay mostly afloat amid the market turmoil.
Splunk came under some pressure earlier this month when its fourth-quarter report disappointed investors. Results were mixed, with earnings missing analyst expectations. More importantly, the company's guidance fell well short of estimates. Splunk sees first-quarter revenue of $450 million and full-year revenue of $2.6 billion, compared with analyst estimates of $523 million and $2.82 billion, respectively.
Now what
The market is panicking, and nearly every stock is getting caught in the stampede of selling. In the long run, what matters is a company's performance. The pandemic will certainly hurt the near-term results of many companies, including these five. But once the crisis passes, it should be business as usual.
There's a lot of uncertainty right now, and markets hate uncertainty. But if you're a long-term investor who still believes in the prospects of these companies, buying at a discount isn't a bad idea.
