Post-pandemic losers – which stocks suffered heavily?

The Covid-19 pandemic created a boom in global stock markets, once the initial panic was over. In particular, a number of companies around the globe saw huge gains in their share prices, based on the idea that people would not only be stuck in their homes for a long period, but that these habits would endure.

Since then, however, normal life has resumed across the world. While these companies remain popular, for example in the widespread use of Zoom for meetings, they have seen their stock prices fall sharply, a lesson in the dangers of high expectations.

ASOS – 92% decline from pandemic peak

The Covid-19 pandemic seemed to offer salvation for ASOS, which had already seen its share price fall from the 2018 record high.

Being stuck at home meant that Britons were unable to go out and visit high street stores. ASOS’ existing strong presence gave it an advantage, and the shares soared nearly 500% from the early 2020 low.

Since then however the company has seen new competitors emerge, while UK citizens have been able to visit ASOS physical rivals as well. Rising inflation and concerns about weak demand have helped to drive the share price down to barely 10% of the Covid-19 pandemic high.

Ocado – 88% decline from pandemic peak

Online supermarket Ocado had already soared from a pre-pandemic low in 2018, gaining over 1000% as short-covering and a spate of deals to license its technology globally meant that the company finally saw some real gains in its shares.

After the early Covid-19 pandemic wobble common to most companies, the shares soared over 180% as online shopping became a vital part of everyday life in Britain.

But since then the shares have steadily fallen, as the company has failed to become a global leader in online shopping technology, and public spats with its supermarket partners have not helped matters either.

Peloton – 97% down from pandemic peak

Exercise bike firm Peloton’s stock had struggled since its 2019 initial public offering (IPO), with consumers put off by the high cost.

But the Covid-19 pandemic forced millions of people to find new ways to exercise now that gyms were closed, and Peloton’s bicycles and group exercises via video made it hugely popular, sending the stock up 800%.

Once people were allowed out again, the bubble rapidly deflated. Peak-to-trough, the stock price is down an astonishing 97% from its pandemic, perhaps the most dizzying rise and fall in recent market history.

What do these stocks teach investors?

The above names, and many others, soared because people thought the world had changed. The Covid-19 pandemic did change much, most notably the shift from offices to home working. But all these names saw huge stock gains based on the idea that they would enjoy huge and unending demand.

It is true that people still buy clothes and groceries online, still make video calls and use exercise bikes, but not as much as had been thought.

Stocks often trade on expectations of future growth, and in the above cases the expected growth failed to materialise in the huge way expected, and the stock suffered accordingly. Huge fortunes were made and lost during the Covid-19 pandemic in these stock moves.

These names are a lesson in investing – beware high expectations. Sometimes forecasts are met, but often the bar is raised too high and the stock has suffered. Post-pandemic winner Nvidia is another lesson here. Having rallied by almost 1000% since the start of 2023, the stock is now struggling in the short-term as it fails to live up to the overexuberant hype around forecast demand for artificial intelligence (AI).

Not all high flyers fall as badly as the stocks above, and Nvidia may yet recover, but chasing stocks with high expectations can be a risky game.