A year ago it was easy to make money owning a piece of Peloton Interactive (PTON -3.56%), Pinterest (PINS -5.06%), and Zoom Video Communications (ZM -1.96%). The three fast-growing companies were obvious winners during the early months of the pandemic.
Peloton was giving folks the active (and, more importantly, interactive) workouts that they couldn't get from their shuttered spinning classes and gym treadmills. Pinterest proved to be the visual search engine that helped inspire everything from shelter-in-place home crafts to savory recipes. Zoom Video gave classrooms, boardrooms, and family reunions the meeting space that wasn't easily safely accessible.
A lot has changed over the past year. Gyms, restaurants, and real-world gatherings are now the new normal. Even with the recent surge in COVID-19 cases across the country, there's the growing consensus that we're not going back inside our homes the way we did last year. And the same can be said about the stocks that grew to represent that phase of the pandemic's investing opportunities.
As my sourdough starter gently weeps
Peloton, Pinterest, and (as of Tuesday) Zoom all tumbled after posting their latest quarterly results. Last year was a hard act to follow for all three of the 2020 winners, but investors weren't expecting momentum to lose its footing as badly as we've seen this summer.
Peloton's fiscal fourth-quarter report last week was a mess. The company behind the high-end stationary bikes and treadmills fell short of Wall Street's profit targets. A surprisingly large price cut on its signature bike is also resulting in weak sales and profit guidance heading into the new fiscal year. Federal subpoenas related to treadmill injuries were the cherry on top of this melting sundae.
Pinterest came undone in late July when the stock plunged 18% the day after delivering disappointing financial results. The real jaw-dropper in the report was a year-over-year and sequential decline in U.S. monthly active users. A lot of people really did keep the Pinterest app closed when it came time to head outside again.
This week's hit is Zoom Video. The stock opened 15% lower on Tuesday after a poorly received quarterly update. A 54% year-over-year increase in revenue exceeded expectations, but investors were spoiled by bigger blowouts in the five previous pandemic-era reports. The real party pooper was guidance. Zoom kept its "beat and raise" streak going this week, but the increase in revenue for the full fiscal year is essentially the amount of the fiscal second quarter's beat. Put another way, it's not a raise in guidance for the second half of the fiscal year.
There are silver linings in all of these sell-offs, and this isn't even addressing the lower price points for potential investors. Peloton's cheaper bikes will help expand its base of high-margin subscriptions. Average revenue per user at Pinterest has more than doubled in the U.S. over the past year. The number of large Zoom customers has also more than doubled over the past year. In short, they continue to be growth stocks by any definition.
Expectations might need to be reset, and all three companies will have a lot to prove when they report again in the fall. However, with the three market darlings of 2020 now trading between 38% and 51% of their highs, one can argue that the bar is going to be lower next time around.