Please ensure Javascript is enabled for purposes of website accessibility

3 Stay-at-Home Stocks That Got Slammed After Reporting Earnings

By Parkev Tatevosian, CFA – Aug 11, 2021 at 10:00AM

Key Points

  • People are leaving their homes more often and shifting their spending habits as well.
  • Stocks that benefitted from the stay-at-home trend are watching it reverse.
  • During these volatile shifts in consumer behavior, investors need to focus on the long term.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Amazon, Pinterest, and Roku each saw their stock prices decline following earnings announcements.

Earnings season is well underway, and a clearly emerging trend is that stay-at-home stocks are reporting decreasing engagement from customers as economies reopen worldwide. 

Three such examples are Amazon (AMZN -0.77%), Pinterest (PINS -0.16%), and Roku (ROKU -0.76%). Each reported sequential declines from the previous quarter and guided investors to expect continued challenges. Unsurprisingly, each of their stocks got hammered following earnings announcements. Let's take a closer look. 

Person sitting at kitchen counter working on home finances with laptop and papers.

Image Source: Getty Images.

Amazon  

Amazon reported second-quarter results on July 29. The company increased net sales by 27% from the year before, which was a deceleration from the year-over-year increase in the prior quarter. Amazon further disappointed investors when it guided them to expect revenue growth from 10% to 16% in the next quarter.

Amazon benefited tremendously at the onset of the pandemic as millions of consumers looked to the e-commerce retailer to fill their needs as they stayed home. Amazon is now going through the reversal of this trend. Still, the company accelerated revenue growth in its more profitable Amazon Web Services segment. 

That wasn't enough to assuage investors, and the stock fell 7.5% following the report.

Pinterest 

Pinterest experienced a surge in usage and revenue as people cooped up at home took to the social media site's platform to find inspiration. From Q2 2020 to Q1 2021, the company increased monthly active users (MAUs) by 62 million. That trend reversed in its most recent quarter, and the company shed 24 million MAUs.

With economies reopening worldwide, folks spent more time outdoors and less time engaging with Pinterest's app. Here is what management had to say about reopening trends:

Since mid-March ... we believe engagement on Pinterest was disproportionately lower as people began spending more time socializing with friends outside their homes, eating in restaurants, and generally participating in activities that are not our core use cases. 

That's spooking investors who are uncertain if the trend will continue in subsequent quarters. The stock is down 16% since Pinterest reported earnings on July 29.

Three people on their phones.

Image source: Getty Images.

Roku 

Demand for in-home entertainment exploded during the pandemic. Understandably, if you're staying home for most of the day, you're looking for more ways to entertain yourself. From its second quarter of 2020 to its first quarter of 2021, time spent watching content on Roku increased from 14.6 billion hours to 18.3 billion hours. 

However, as economies reopened in Roku's most recent quarter, viewership declined from 18.3 billion hours to 17.4 billion hours. Since most of Roku's revenue and profit comes from its platform segment that relies on viewership, the decline is troubling. Management commented on the matter:

Consumers sought increased out-of-home entertainment activities (such as dining and travel) in Q2 as a result of pent-up demand and the loosening of COVID-19 restrictions, which led to a broader secular decline in overall TV viewing hours. 

The stock was down 4% on the day following the August 4 report. 

Focus on the long term 

It was unrealistic to expect the surge that sent millions of folks to these companies due to economic lockdowns to last forever. That does not mean Amazon, Pinterest, and Roku will not gain lasting benefits from the pandemic. Each acquired millions of new customers during the crisis. Admittedly, some of those customers may return to old habits as economies reopen, but some will stick around for the long run. 

Additionally, the pandemic accelerated the world's shift to digital. In the long run, more shopping will be done online, and more content will be streamed digitally. The near term will consist of fluctuations of these trends, but their overall trajectory is unlikely to change. Investors should keep that in mind as they evaluate quarterly reports. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Parkev Tatevosian owns shares of Amazon, Pinterest, and Roku. The Motley Fool owns shares of and recommends Amazon, Pinterest, and Roku. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amazon Stock Quote
Amazon
AMZN
$93.41 (-0.77%) $0.72
Roku Stock Quote
Roku
ROKU
$56.08 (-0.76%) $0.43
Pinterest Stock Quote
Pinterest
PINS
$24.99 (-0.16%) $0.04

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.