Lockdown winners hit as Nasdaq suffers rout
Netflix and Peloton among the tech stars to endure plunging share prices as workers return to office
TECHNOLOGY shares have suffered their worst week since the start of the Covid crisis amid a global return to the office that threatens to derail lockdown winners such as Netflix and Peloton.
Netflix shares crashed more than a fifth on the streaming company’s bleakest day of trading for a decade yesterday after the business reported disappointing subscriber growth – a rout that helped drive the tech-heavy US Nasdaq index into its poorest weekly performance since March 2020.
Other stay-at-home stocks such as Zoom, Amazon, Disney and Doordash also slumped. Peloton, another darling of the pandemic, fell by 24pc on Thursday after reports that it had suspended production of home exercise equipment. A rally yesterday failed to undo most of the damage.
The falls took the Nasdaq further into correction territory, where shares are more than 10pc below their latest peak, and sparked speculation that a multitrillion dollar tech bubble could finally be about to burst. Bitcoin also dropped more than 10pc yesterday, continuing a slump in which it has lost more than two-fifths of its value since November.
Scott Redler of T3 Live, a US trading company, said: “The market has been flashing faulty signals for the past few weeks and it seems as if the broader indices are finally breaking down.”
The fall follows months of surging growth for tech stocks that propelled the Nasdaq to record highs last year. It has risen 55pc since the onset of the pandemic, driven by a wall of money from investors betting on long-term changes in consumer behaviour as working from home became the norm.
However, traders are increasingly concerned that problems at Peloton and Netflix suggest the boom is nearing an end.
Netflix blamed a “Covid overhang” for disappointing quarterly results on Thursday night, posting its slowest annual growth since 2015 and predicted its worst start to a new year for 13 years.
The share slump suffered by the company yesterday took its stock to the lowest level since March 2020, just before it began a record growth spurt driven by a subscriber surge during lockdown.
The Nasdaq has lost 5.4pc of its value since Monday. It is down 10.6pc so far this month – the biggest rout since 2002, during the aftershocks of the dotcom crash.
In Britain, the FTSE 100 dropped 1.2pc on its worst day since late November amid a wider European sell-off, knocking about £25bn off the valuation of London’s biggest listed companies.
The UK blue-chip market is the only major Western index that has risen overall so far this year.
The prospect of improving economic conditions mean traders have pursued energy and consumer companies more closely linked to the recovery.
Expectations that the Federal Reserve will shrink its balance sheet and trim back monetary stimulus in the face of surging inflation have also hit tech companies.
High growth companies have been boosted by a decade of rock-bottom rates, which raise the value of future profits but are especially vulnerable to tighter financial conditions.
Investors have rotated into other sectors such as energy, which has soared by nearly a quarter since the start of the year. Ethan Hall, a Bank of America analyst, said: “It has been a long time since markets have had to deal with a serious inflation-fighting Fed.”
Peloton shares recovered slightly after John Foley, the chief executive, denied reports that it had suspended production of its at-home bikes and treadmills.
However, he said the company would cut staff as part of “significant corrective actions to improve our profitability outlook”.
Shares climbed by 10.6pc yesterday.
PELOTON confirmed it was considering job cuts as its chief executive denied the company was halting production of its pricey bikes and treadmills.
The firm, which saw a jump in sales in lockdowns only to then tail-off, said it will review the structure and size of its workforce and “right-size” its internetconnected products following a report on Thursday that said it was planning a temporary production pause.
John Foley, chief executive and cofounder, told employees “rumours that we are halting all production of bikes and treads are false”, He said the firm had identified a “leaker” and “it was moving forward with the appropriate legal action”. Mr Foley added the information was “incomplete, out of context, and not reflective of Peloton’s strategy”.
The CNBC report sent shares down as much as 27pc before regaining ground, wiping off nearly $2.5bn (£1.8bn) in market value. They rose 8pc in premarket trading in New York yesterday.