It’s no secret that 2020 was a bumper year for tech. As we all were confined to our homes, we adopted online solutions like never before--we ordered pizzas, shopped online and attended so, so many video calls.
As such, in some ways our behaviours have been forever altered. But are the stocks that benefited from the original upheaval forever altered for the better too?
We’ve collected data on the the biggest online winners of 2020 to see which stocks are happy in the hybrid world, and which ones thrived momentarily on habits we would rather forget. For ease, we have not included the so-called meme stocks (even if GameStop did see a 200% growth in 2020).
The top 5 stocks of 2020 were Tesla (TSLA), Peloton (PTON), Zoom (ZM), Etsy (ETSY) and Teladoc Health (TDOC). Those unable to attend their favourite gyms during Covid-19 were raving about Peloton during lockdowns, and its virtual classes and bikes ensured growth of 417.74% during a pivotal year. It was the second biggest winner on our list – but it's also been the biggest loser of the lot this year as people returned to their gyms, sport classes and outdoor exercise.
Fund managers who own stocks in the wider sporting industry, including Peloton, argue that some people will still be keen to avoid crowded gyms and restaurants even if they’re vaccinated. And, at least some of those who took on new habits during the pandemic, like using an exercise bike at home, will hold on to these (especially if you’ve paid around £2,000 for a Peloton bike and signed up for its subscription model). However, at its current price, Morningstar’s quantitative analysis finds PTON to be fairly valued.
Of the top five, Zoom and Teladoc also make the bottom five for 2021 so far. Covid-19 certainly ensured a massive influx of users to video conferencing platforms, so for the fairly-valued Zoom, we expect commercial customers to remain with the platform for years to come--most of us have after all finally learned how to use the mute button. As a result, we recently raised our economic moat rating on Zoom to narrow from none, and our moat trend rating to positive from stable. The company is down 20.44% so far this year, but that again is not significant after growing 380.46% in 2020.
Remote healthcare provider Teladoc, meanwhile, grew 131.47% in 2020, but is now down 31.33% this year, trading at a 35% discount with a 4-star rating. Morningstar’s equity analyst Dylan Finley says investors are still struggling to understand the company's operating model and digest its results.
“We attribute the initial dip as an overreaction to the flat membership base, which has been slow to grow since the initial spike at the onset of the COVID-19 pandemic," he says.
Continued Winners
Surprising nobody, Tesla has fared best of the top stocks. The electric-vehicle manufacturer is now the fifth largest stock in the United States, having risen from the 65th largest in January 2020. We’ve adjusted our fair value estimate of the stock several times since, to reflect the growth of the company, and we have also written insight pieces on the stock’s development and eventual investor revolt. So far this year, the company has grown 46.14%, a number which would be impressive were it not for a 717.40% growth spurt in 2020.
Finally, Etsy has also continued to do well--anda lot better than Amazon (AMZN), which maintains a middle spot on our list for both 2020 and 2021, with respective returns of 70.82% and 10.79% in those two years. Etsy's business model is based on sellers listing products on its platform. During Covid-19, this model was turbocharged as the business achieved greater scale, margin and outlook, fund managers say, and that is now reflected in the business's current stock price. It is currently rated 1 star by our quantitative rating team. Etsy’s returns increased 289.21% during 2020, and they have grown an additional 56% this year.
