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Why These Software and Internet Stocks Tumbled Today

By Timothy Green - Mar 12, 2020 at 9:37PM

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Yandex, MicroStrategy, Blackbaud, and Yelp were down big on Thursday.

What happened

Shares of Yandex (YNDX -6.79%), MicroStrategy (MSTR -1.50%), Blackbaud (BLKB 5.03%), and Yelp (YELP -0.95%) tumbled on Thursday as the U.S. stock market logged its worst day in decades. Escalating fears surrounding the novel coronavirus pandemic and the associated economic impact pushed the S&P 500 down around 9.5%.

There was no company-specific news for these four software and internet stocks. When the selling is this intense, nearly every stock gets hit. Here's how they fared on Thursday:

Stock

% Change

Yandex

(10.5%)

MicroStrategy

(12.6%)

Blackbaud

(10.7%)

Yelp

(10.6%)

Data source: Yahoo! Finance.

So what

With Thursday's plunge, all four stocks are now down substantially over the past year.

YNDX Chart

YNDX data by YCharts.

While shares of Russian Internet company Yandex are down the least over the past year, they've fallen hard since peaking a few weeks ago. The stock is down about 34% from its 52-week high. In addition to the panic over the novel coronavirus pandemic, the drama in the oil markets involving Russia could be weighing on the stock.

MicroStrategy gave investors some good news back in January when it handily beat analyst estimates with its fourth-quarter report. The company reported revenue of $133.5 million and earnings per share of $1.18, beating expectations by $2.54 million and $0.35, respectively. However, revenue barely grew, as subscription growth was partially offset by a decline in product license revenue.

Cloud software company Blackbaud posted solid results of its own in February, beating analyst estimates across the board. Revenue was up 7.5% to $237.8 million, and adjusted earnings per share (EPS) were $0.51. Revenue beat expectations by $5.7 million, and EPS beat by $0.01. Of course, none of that matters when the market is in panic mode.

Yelp hasn't been doing as well, missing expectations when it reported in February. Yelp reported 10% revenue growth, but a larger-than-expected seasonal reduction by small- and medium-sized business customers knocked down the growth rate. EPS were $0.24, down from $0.37 in the prior-year period.

Yelp may be in deep trouble if the pandemic leads to a severe decline in consumer activity in the U.S. Its business customers won't have much reason to advertise, and some could be forced to shut down as demand falls off a cliff.

Yelp guided for 2020 revenue growth between 10% and 12%, but hitting that range looks unlikely given the current situation.

A stock chart with a declining white arrow.

Image source: Getty Images.

Now what

The novel coronavirus pandemic is going to affect nearly every company to some degree. There's a tremendous amount of uncertainty, and that uncertainty is manifesting itself as a severe stock market sell-off.

If you're a long-term investor in a company you believe will have no trouble surviving this crisis and thriving after the dust has settled, prices are as low as they've been in a long time. How these four software and internet stocks fare in the short term is anyone's guess. In the long term, the stock performance will depend on how the business itself performs.

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Stocks Mentioned

Yelp Inc. Stock Quote
Yelp Inc.
YELP
$29.30 (-0.95%) $0.28
MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
MSTR
$201.51 (-1.50%) $-3.06
Yandex N.V. Stock Quote
Yandex N.V.
YNDX
$18.94 (-6.79%) $-1.38
Blackbaud, Inc. Stock Quote
Blackbaud, Inc.
BLKB
$57.06 (5.03%) $2.73

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

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