What happened
Shares of Etsy (ETSY +3.84%), Wayfair (W +5.20%), and Adobe (ADBE 1.49%) jumped in early-morning trading on Friday. All three of these stocks rose by double digits before settling down. As of 1:22 p.m. EDT, they were up 5%, 5%, and 7%, respectively.
So what
It's been a historically brutal week on Wall Street, but we appear to be closing out the week out on a high note. The S&P 500, Dow Jones Industrial Average, and Nasdaq all rose as much as 6% in the early morning before moderating a bit. The three major U.S. indices are currently up about 3.5%.
Image source: Getty Images.
Unfortunately, today's rally is still nowhere close to making investors whole. The three major U.S. stock market indices are still in bear market territory.
There wasn't any good news related to the novel coronavirus pandemic released today that can justify a huge move upward. That makes it likely that the bullish move is most likely just a bounceback from the recent surge in selling pressure.
When volatility ramps up, growth stocks such as Etsy, Wayfair, and Adobe Systems tend to fall harder and rise faster than the overall market.
Given the lack of other news from these companies -- none of them published press releases or SEC filings today -- the upward stock movements look to be entirely attributable to the overall market move.
Now what
There's no telling how the COVID-19 coronavirus pandemic might affect Etsy, Wayfair, or Adobe Systems moving forward, but all three of these companies finished strong in 2019.
Etsy grew its top line 35% in the fourth quarter of 2019, largely on the back of double-digit growth in active buyers and sellers. CEO Josh Silverman even stated in late February that Etsy was "off to to a great start with our 2019 performance." While the coronavirus has expanded significantly since then, investors should take some comfort in those words.
Wayfair capped off 2019 with 26% top-line growth in the fourth quarter. CEO Niraj Shah continues to see big opportunities ahead for the business, noting, "While already operating at a run rate in excess of $10 billion in annual net revenue, we have barely scratched the surface of our total addressable market." Funding that growth hasn't come cheap, though, as Wayfair's net loss was almost $1 billion in 2019.
All systems were "go" for Adobe in its fiscal first quarter of 2020. Revenue grew 19% to $3.1 billion, non-GAAP earnings per share (EPS) grew 33% to $2.27, and free cash flow production expanded 42% to about $1.28 billion. CFO John Murphy stated, "Our recurring revenue model and the real-time visibility we have into our business uniquely positions Adobe to manage through an uncertain environment." That statement should give investors some confidence in the company's ability to continue posting strong growth for the foreseeable future.
Growth stocks have had a wild trading week, and there's no telling what might happen over the weekend. While investors should hope that good news is on the way, they also need to mentally prepare themselves for a lot more volatility ahead.
