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Why DocuSign and Zoom Video Stocks Sank Today -- but CrowdStrike Bounced

By Rich Smith - Updated Sep 8, 2020 at 12:53PM

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The tech sell-off continues. But could it be ready to end?

What happened

Last week's tech sell-off picked up where it left off on Tuesday, with DocuSign (DOCU 0.23%), CrowdStrike Holdings (CRWD -0.57%), and Zoom Video Communications (ZM 0.78%) resuming their respective declines. All three stocks tumbled more than 5% early this morning, and DocuSign shares remain down 2.7% as of 12:05 p.m. EDT, while Zoom is down 2.8%.

But CrowdStrike is now up 2%.

Green up arrow button and red down arrow button

Image source: Getty Images.

So what

Why did all three stocks sink this morning, and why is one of them turning around? The first question is easier to answer than the second.

Shares of DocuSign and Zoom Video are up 260% and 360%, respectively, over the past year. While CrowdStrike is up "only" 75%, all three stocks have vastly outperformed the broader S&P 500, owing to their far faster-than-average growth rates. Last quarter alone, CrowdStrike's sales improved 84% year over year, while DocuSign posted 45% growth and Zoom's sales zoomed 355%.

Over the weekend, though, Barron's warned that despite the impressive sales growth, Zoom Video stock, which sells for 196 times forward earnings, simply "has to come down to earth." Hearing that, investors probably extrapolated that Street professionals may be getting similarly skeptical of DocuSign's valuation (555 times forward earnings) and CrowdStrike's as well. (With no earnings this year, none projected for next year, and indeed, no profits likely before 2023 according to analysts polled by S&P Global Market Intelligence, CrowdStrike has no forward P/E.)  

Now what

Profitless CrowdStrike's sudden reversal in fortunes, however, and its 2% share price gain today, suggest that investors may be betting that CrowdStrike at least has less to lose than its fellow tech stocks.

Moreover -- and more broadly -- it may suggest investors are once again prepared to reward tech stocks for beating earnings estimates. CrowdStrike may be the only one of these three tech stocks rising today, but its revival may also foreshadow better days ahead for its peers.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CrowdStrike Holdings, Inc., DocuSign, and Zoom Video Communications. The Motley Fool has a disclosure policy.

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Stocks Mentioned

DocuSign Stock Quote
DocuSign
DOCU
$69.75 (0.23%) $0.16
Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$103.18 (0.78%) $0.80
CrowdStrike Holdings, Inc. Stock Quote
CrowdStrike Holdings, Inc.
CRWD
$195.76 (-0.57%) $-1.13

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

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