Cloud computing stocks have been some of the hottest tickets during the coronavirus pandemic. Over the past year, shares of database platform MongoDB (MDB -2.85%) have doubled, the stock of e-signature company DocuSign (DOCU -1.06%) has tripled, and "cloud edge" provider Fastly (FSLY -8.81%) has quadrupled. But on Tuesday, all three of these tech stocks came tumbling down.
By the time markets closed for the day, MongoDB had lost 4.2% from its Monday closing price, DocuSign had dropped 5.3%, and Fastly was down 3.6%.
One theory is that these stocks, all of which profited mightily from the epochal shift to working from home, are suffering from negative "pin action," and responding negatively to how investors greeted Zoom Video's (ZM -0.25%) third-quarter earnings today.
Zoom Video stock, perhaps the shining example of what a pandemic can do for a work-from-home stock, has outperformed any of the other stocks named above, more than sextupling in value over the past year. And yet, despite reporting stunning sales growth of 367%, Zoom tanked today on worries that its growth may be slowing, and concerns that its margins didn't measure up (mostly because Zoom is giving away so much of its service for free, propping up school districts that use it for e-learning).
Now investors are wondering if the same concerns that doomed Zoom today might infect shares of MongoDB, Fastly, and DocuSign as well.
This is not an idle concern. On Monday, Operation Warp Speed's leader, Lt. Gen. Paul Ostrowski, went on MSNBC to assure Americans that by the end of June, 100% of Americans who want one of the new coronavirus vaccines under development will have had it by then. "We'll have over 300 million doses available to the American public well before then," he added.
Assuming he's right, the pandemic could be close to ending -- perhaps beginning to fade into history as early as this coming summer. When that happens, the need for people to continue working from home should abate, and the growth rates of tech companies that benefited from that trend should slacken.
At that point, will investors continue to pay 103 times sales for Zoom's slower growth rate. And will they even be willing to pay a 35 times sales multiple for DocuSign, 34 times sales for Fastly, or a 31 multiple for DocuSign?
If investors are even starting to rethink owning Zoom Video (which is profitable), I very much fear the risk surrounding these three other, unprofitable companies is even greater.