Small tech stocks soar as future arrives early
Fastly is up more than 310% this year. Zscaler is up more than 180%. Chegg and Veeva are up 75% and 90%. In a tech universe dominated by Apple, Amazon, Microsoft and Google, the share prices of little companies you’ve probably never heard of are soaring.
The coronavirus pandemic has accelerated trends thatwere building for years by forcing large swaths of the population towork fromhome and shop online. And many obscure companies are taking off, driven by investors who expect them to flourish in an economy whose future arrived ahead of schedule.
“Whenitcomes toremotework in particular, the past 10 weeks have seen more changes than we’ve seen in the previous 20 years,” said Erik Brynjolfsson, an economist and the director of the Digital Economy Lab at Stanford University.
Surveys conducted by Brynjolfsson and economists at the Massachusetts Institute of Technology found that the share of Americans working from home jumped to about 50% this year, fromaround 15% before the pandemic.
“We haven’t seen anything like it sinceWorldWar II,” Brynjolfsson said of the broad workforce upheaval.
Thetech-heavyNasdaqcomposite index is up roughly 60% since it bottomed out in late March, and much of those gains can be attributed to the shares of the tech behemoths. Investors have bet heavily that those companies’ dominant market positions will
only improve in the pandemic and its aftermath.
But the trajectory of smaller technology stocks has been even more remarkable. Zoom — the suddenly ubiquitous video conferencing service — has been an investor darling, up close to 500% this year as workplaces shut down. Peloton, the home video cycling company, is up almost 200% amid widespread gym closures — and just added to its product line.
Lesser-known companies are also posting eye-popping gains: Fastly, which sells services that enable faster delivery of increasingly complex video and gaming technology; Chegg, which offers digital textbook rentals among its education technology services; and Veeva, which provides cloud services to life sciences companies, including for management of clinical trials.
Information security companies have been of particular interest
to investors, who see them as crucial to the future of remote working. Zscaler, for example, is a cloud-based information security company. Its fellowsecurity service CrowdStrike is up more than 150%.
Shares of online retailers Carvana and Etsy are up more than 90% and 140%, as in-person shopping has collapsed.
At the end of June, more than 16% of all retail saleswere online, upmore than 5 percentage points from last year.
The last time e-commerce gained 5 percentage points of market share, it took roughly seven years.
Traditional retailers are scrambling tocompete, andtech is there to capitalize, too: The number of stores served by Shopify, which helps them develop e-commerce operations, jumped71% inthe second quarter from the first three months of the year. Its shares are up more than 120%.