Everyone Get Back to the Office

by Dave Michels

Today was a busy news day. Kind of makes sense because last week everything came to a halt so we can watch the election.

Without doubt, the biggest news day was from Pfizer. This story is from Yahoo!, but it’s typical of the stories that ran today.

Pandemic ‘stay at home stocks’ like Peloton, Zoom, Roku tank on Pfizer vaccine news—is it an overreaction? 

Pfizer on Monday morning announced that its experimental COVID-19 vaccine, developed in partnership with BioNTech, was more than 90% effective in studies and that it could distribute 50 million doses before the end of this year, and 1.3 billion doses in 2021. The good news immediately sent U.S. markets broadly higher—especially airline stocks, energy names, bank stocks, in-person entertainment like theme parks, and real estate—except for a slew of key names that have seen huge gains during the pandemic, boosted by prolonged work-from-home trends. Those “stay-at-home stocks” were hit hard. Peloton (PTON) fell by as much as 25%; Logitech (LOGI) fell 19%; Zoom Video (ZM) dropped 17%; CrowdStrike (CRWD) fell 11%; Chewy (CHWY) fell 10%; Roku (ROKU) sunk 7%; Netflix (NFLX) fell 6%; Slack (WORK) was down 4%.

First, this is great news. As of the day before, there was no evidence that a vaccine was on the horizon. So, no wonder markets popped. Even better, Pfizer claims a 90% efficacy. This is spectacular, unexpected news. The DJIA went up 834.57, or 2.95%. The big winners were Pfizer (+12%) airlines and travel related stocks did well, so did Disney and AMC.

Some of the winners of the pandemic went down. This includes Amazon, Facebook, PayPal, and Netflix dropped. So did meetings vendors. Zoom dropped 13% and Poly and Logitech saw drops too.

But Here’s the Thing

I get why airlines, Disney, and AMC went up. They are barely alive – empty planes, closed parks, and closed theaters will do that. Their stocks went up because their customers are now expected to return, and that’s a big deal. You could say they were always expected to return, but would the airline still be there when that occurred?

The pandemic losers will become winners, but the logic is not reversible. The end of a pandemic does not mean that everyone is going back to the office. Of course many will, and that’s great. But not everyone. I’m not even talking about the 1-2 years it might take for a vaccine to get distributed. My point is that distributed work is here to stay. It was already trending pre-pandemic and now everyone knows it can work. Most meetings will have at least one remote person, and one remote person makes it an online meeting.

That means meetings will still be online AND offices will need more video-enabled devices and rooms. Logi and Poly in particular are in a great position, but the online meetings sector as a whole will be fine. In fact, office users will demand new in-office capabilities for their meetings. I expect to see more demand for digital white-boards. Pre-pandemic we were seeing strong interest in the ability to escalate a phone call to a meeting (and back). That dropped off during the pandemic, but it will likely return when offices start to fill up again. There’s going to be a new round of demand for headsets and cameras as the ones at home will likely stay there.

One of the best stock tips I ever got was the market always overreacts.