Seeing Red: Is the Heydey of Pandemic Stocks Over?
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Seeing Red: Is the Heydey of Pandemic Stocks Over?

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pandemic stocks

The Briefing

  • Global equities are in a downward spiral, and experienced their worst week in more than a year.
  • Worries about slowing post-COVID demand and rising rates fueled the selloff.
  • Pandemic stocks were some of the hardest hit, with Shopify and Netflix dropping 35.3% and 33.5% respectively.

Seeing Red: Is the Heydey of Pandemic Stocks Over?

The stock market, and the stocks that flourished during the COVID-19 pandemic in particular, are off to a rough start in 2022. If you’ve been watching your investment accounts, chances are you’ve been seeing a lot of red. Shaken by the uncertainty of a pandemic recovery and future interest rate hikes, investors have been selling off their stocks.

This market selloff—which occurs when investors sell a large volume of securities in a short period of time, leading to a rapid decline in price—has investors concerned. In fact, search interest for the term “selloff” recently reached peak interest of 100.

2022 market selloff

Which stocks were the hardest hit, and how much are their prices down so far this year?

The Lackluster Returns of Pandemic Stocks

Pandemic stocks and tech-centric companies have suffered the most. Here’s a closer look at the year-to-date price returns for select stocks.

CompanyYear-to-Date Price Return
Shopify-35.3%
Roblox-30.2%
Block-28.0%
Moderna-31.9%
Zoom-19.9%
Netflix-33.5%
Snapchat-31.1%
Peloton-23.1%
Coinbase-23.5%
DocuSign-26.0%
Amazon-16.3%
Robinhood-29.6%

Price returns are in U.S. dollars based on data from January 3, 2022 to January 21, 2022.

Netflix fueled the selloff after it reported disappointing subscriber growth. The company added 8.28 million subscribers in the fourth quarter, which is less than the 8.5 million it added in the fourth quarter of 2020. It also projects to have slower year-over-year subscriber growth in the near term, citing competition from other streaming companies.

Meanwhile, Coinbase stock lost nearly a quarter of its value so far this year. As the price of cryptocurrencies such as Bitcoin have plummeted, investors worry Coinbase will see lower trading volume and therefore lower fees.

The contagion also spread to other pandemic stocks, such as Zoom and DocuSign, as investors began to doubt the staying power of stay-at-home stocks.

Following the Herd

While investor exuberance drove many of these stocks up last year, 2022 is beginning to paint a different picture.

Investors are worried that rising rates will negatively impact high-growth stocks, because it means it’s more expensive to borrow money. Not only that, but they also may see Netflix’s growth as harbinger of things to come for other pandemic stocks.

The psychology of the market cycle also plays a role—amid these fears, investors have adopted a herd mentality and begun selling their shares in droves.

Where does this data come from?

Source: Google Finance

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AWS: Powering the Internet and Amazon’s Profits

Amazon is best known for its sprawling ecommerce empire, but three-quarters of the company’s profits actually come from cloud computing.

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This graphic shows the surge in AWS profits which now represent 74% of Amazon's total profits

The Briefing

  • Cloud computing has become a hugely important element of Amazon’s business
  • In 2021, AWS accounted for 13% of Amazon’s revenue, but clocks in nearly three-quarters of their operating profit

AWS: Powering the Internet and Amazon’s Profits

The Amazon growth story has been a remarkable one so far.

On the top line, the company has grown every single year since its inception. Even in going back to 2004, Amazon generated a much more modest $6.9 billion in revenue compared to the massive $469 billion for 2021.

Most of these sales come from their retail and ecommerce operations, which the company has come to be known for. However, on the bottom line, the source of profit paints a completely different picture. That’s because 74% of Amazon’s operating profit comes from Amazon Web Services (AWS).

Here’s a closer look at the financials around Amazon and AWS:

YearAWS Operating Profit ($B)Total Operating Profit ($B)AWS % of Operating ProfitRevenue ($B)
2021$18.5$24.874%$469.8
2020$13.5$22.959%$386.1
2019$9.2$14.563%$280.5
2018$7.2$12.458%$232.8

Ultimately, the data suggests that the cloud business has been, and possibly will always remain, a higher margin business and consistent profit center in comparison to ecommerce and the physical distribution of goods.

A Glance at AWS

AWS is Amazon’s cloud computing service that provides the critical infrastructure for an assortment of applications like data storage and networking. With this, they help fuel over a million organizations including businesses like Twitter and Netflix and even both the U.S. and Canadian Federal Governments.

Here are some other notable entities and the monthly payments they’ve made towards AWS:

AWS CustomerMonthly Payments ($M)
Netflix$19
Twitch$15
LinkedIn$13
Facebook$11
Turner Broadcasting$10
BBC$9
Baidu$9
ESPN$8
Adobe$8
Twitter$7

Source: Continho (2020)

Based on these monthly figures from 2020, AWS collects $1.3 billion in sales a year just from these 10 customers, while raking in $62 billion of revenue overall. Moreover, this makes them the leader in the competitive cloud market.

Chart showing the market share of cloud computing companies as of 2021. AWS leads at 33%

In an industry worth an excess of $180 billion, Amazon’s 33% market share position exceeds both Google and Microsoft (Azure) combined. Their market share also surpasses the bottom six shown on the chart combined, who are formidable tech giants in their own right.

The Future of AWS?

AWS has been a cash cow for years and there have even been rumors of an Amazon split up, where AWS would spin off as its own entity. It’s believed by some that if the cloud segment of the business separates, it will be seen as a pure play on the cloud industry and will be awarded a higher valuation multiple by the market.

One thing is for sure, from the perspective of profits, Amazon could be better be described as a cloud company, with an ecommerce business on the side.

Where does this data come from?

Source: Amazon SEC Filings
Notes: Operating profit is the profit from the business before the deduction of non-operating expenses like interest and taxes.

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Ranked: These Are 10 of the World’s Least Affordable Housing Markets

An analysis of 90+ major cities reveals which ones are the least affordable housing markets based on their price-to-income ratio.

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The Briefing

  • For the 12th year in a row, Hong Kong is the world’s least affordable housing market, according to Demographia’s ranking of 92 cities in select countries
  • Sydney, Australia moves up one spot from last year’s ranking to take second place

These Are 10 of the World’s Least Affordable Housing Markets

It’s become increasingly difficult for middle-class families to purchase a home over the last few years—and the global pandemic has only made things worse.

According to Demographia’s 2022 Housing Affordability Report, the number of housing markets around the world deemed “severely unaffordable” increased by 60% compared to 2019 (prior to the pandemic).

This graphic looks at some of the least affordable housing markets across the globe, relative to median household income. The report covers 92 different cities in eight nations: Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the United States.

The Least Affordable Housing Markets

Before diving in, it’s worth outlining the methodology used in this report, to help explain what’s classified as a severely unaffordable housing market.

To calculate affordability, a city’s median housing price and divided by its median household income. From there, a city is given a score:

  • A score of 5.1 or above is considered severely unaffordable
  • 4.1 to 5.0 is considered seriously unaffordable
  • 3.1 to 4.0 is considered moderately unaffordable

All the cities on this graphic are classified as severely unaffordable⁠—and, for the 12th year in a row, Hong Kong takes the top spot as the world’s most unaffordable housing market, with a score of 23.2.

Housing MarketNationScore
Hong Kong🇭🇰​ Hong Kong (SAR)23.2
Sydney, NSW🇦🇺​ Australia15.3
Vancouver, BC🇨🇦​ Canada13.3
San Jose, CA🇺🇸​ U.S.12.6
Melbourne, VIC🇦🇺​ Australia12.1
Honolulu, HI🇺🇸​ U.S.12.0
San Francisco, CA🇺🇸​ U.S.11.8
Auckland, AUK🇳🇿​ New Zealand11.2
Los Angeles, CA🇺🇸​ U.S.10.7
Toronto, ON🇨🇦​ Canada10.5

One reason for Hong Kong’s steep housing costs is its lack of supply, partly due to its lack of residential zoning—which only accounts for 7% of the region’s zoned land. For context, 75% of New York City’s land area is dedicated to residential housing.

Sydney moved up one spot this year, making it the second most expensive city to purchase a home on the list, with a score of 15.3. Besides Hong Kong, no other city has scored this high in the last 18 years this report has been released.

There are several theories for Sydney’s soaring housing rates, but industry expert Tom Forrest, CEO of Urban Taskforce Australia, boils it down to one fundamental issue in an interview with Australia Broker—supply isn’t keeping up with demand:

“Housing supply has been consistently not meeting demand in the Greater Sydney and across regional New South Wales…if you have supply consistently not meeting demand then the price will go up. That’s what happened and we’re seeing it in abundance.”Tom Forrest, CEO of Urban Taskforce Australia

The COVID-19 Impact

Middle-income earners were already feeling the squeeze prior to the global pandemic, but COVID-19 only exacerbated housing affordability issues.

As people began to work from home, high-income earners started to look for more spacious housing that wasn’t necessarily in the city center, driving up demand in suburban areas that were relatively affordable prior to the pandemic.

At the same time, supply chain issues and material costs impacted construction, which created a perfect storm that ultimately drove housing prices up.

But with interest rates rising and COVID-19 restrictions easing around the world, some experts are predicting a market cool down this year—at least in some parts of the world.

>>Like this? Then you might like this article: How Much Prime Real Estate Could You Buy for $1M?

Where does this data come from?

Source: Demographia
Details: The affordability score is calculated by taking a city’s median housing price and dividing it by the median household income. Anything over 5.1 is considered severely unaffordable
Notes: Data includes 92 metropolitan markets across eight countries; Australia, Canada, Ireland, Singapore, China, New Zealand, the U.K., and the U.S., as of the third quarter of 2021. Many European countries, along wth Japan, we excluded from the dataset, because information on median income was not readily available.

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