EDITOR'S NOTE
Peloton got absolutely shredded in the stock market today. The stock fell 24% after our own Lauren Thomas reported that the company is halting production of its bikes for two months--and of its treadmills for six weeks--after facing a "significant reduction" in demand.
Peloton shares have fallen all the way from their $161 highs last year to $24 today, which is even below the company's late 2019 IPO price. Some even blamed it for ruining the market's rally attempt; the Nasdaq gave up a 2% rally today and ended up closing lower by 180 points, or two-thirds of one percent.
And just as soon as the market finally, mercifully, closed, Netflix results hit the tape with another bang. The company actually beat on earnings, but warned that it's likely to add only 2.5 million subscribers in this current quarter. That is way fewer than expected! The street was looking for more like seven million, because, as Michael Santoli pointed out on-air, they're expecting Netflix to be adding more than 20 million subscribers this year and next. If the new run-rate is suddenly more like 10 million, that's a massive difference.
Netflix shares are now down 20% after hours. It's literally gone from being over a $500 stock to barely a $400 one. It's forward price-to-earnings ratio is now a measly, humble 35! Remember back when it used to trade over 100 times? And it's not like they're losing to competitors--investors sold off Disney, too, on concerns that demand for streaming overall is down.
But wait. What's going on here? Didn't we just learn today that two of the biggest pandemic beneficiaries are now reeling from lower than expected demand? Isn't that, dare I say, a good thing? A sign that the pandemic may be close to being over?
It's not just Peloton and Netflix. The meme stocks--which were all the rage when people were cooped up with nothing else to do and not even sports to bet on--have more or less come back down to earth. AMC has gone from $72 to $18. Moderna--a meme and vaccine play--has gone from almost $500 to $165 (and is down 35% just since January 1). Even GameStop has gone from $483 to $100.
And then there are the semiconductors, which people started warning about last fall ("Are semis about to get lumbered?"). Granted Nvidia and AMD have completely changed the game, and we need more chips in more things than ever, and the pandemic sped up digitization, and so on. But the "SMH" ETF was trading in the $140s when the pandemic hit. It reached as high as $318 in late November, around when the Nasdaq was peaking. And it's since down to $276.
Maybe, just maybe, we are unwinding the pandemic trades. Maybe that's a good and healthy thing, as much as it hurts to lose money in these stocks. The trouble is, we're finding out to what extent the whole market was one of those trades. Maybe just the last 5-10%? Maybe more?
It's all the more reason why the Fed is unlikely to "rescue" any steep selloffs here. We're all conditioned to a 10% market drop being met with some dovish jawboning from Fed officials. But as Michael Darda warned us earlier this week, that was back when growth was fragile and policy makers couldn't afford any tightening of financial conditions. Now, growth is strong, inflation is high, and they need to tighten quickly. A market drop actually helps achieve their goals.
Wouldn't it be nice to have a world in which the pandemic could be over and it could still be easy to make money in stocks. But if I had to pick just one, I'd take ending the pandemic any day of the week.
See you tonight on Shep and tomorrow at 1 p.m!
Kelly
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Kamis, 20 Januari 2022
Why these stock plunges are GOOD news
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