Picking through the pandemic winners that have plunged for any comeback candidates

Published Thu, May 5 20221:33 PM EDTUpdated Thu, May 5 20222:00 PM EDT

Two years later, pandemic beneficiary stocks are darlings no more. Shares of companies that helped consumers adapt to lockdowns and social distancing saw huge returns in 2020 as investors rushed to capitalize on the changing world. But in 2022, pandemic winners with limited profitability are struggling as climbing interest rates weigh on valuations and discount future earnings. Thursday's sell-off was the latest example of investors ditching these names. As the S & P 500 dropped more than 3% and the Nasdaq tumbled more than 4% midday, names such as Etsy and DocuSign and Moderna were among the biggest laggards on the indexes. With stocks struggling to stage a sustainable rebound in recent months, the path forward looks even murkier for pandemic winners that have been the epicenter of the market turmoil. CNBC Pro took a look at beaten-up pandemic darlings to see which names could have some value — not an easy task. We screened the Nasdaq for components with at least a $5 billion market cap, which saw share prices at least double in 2020 and are now down at least 60% from their highs. Take a look at our list: (Source: FactSet. As of May 5, 2022.) From this cohort, Wall Street does like some of the names. Roku , for example, has more than 75% of analysts calling it a buy. The streaming stock more than doubled in 2020, but is off its recent high by 77.6% and down 51.8% in 2022. Deutsche Bank in March said Roku's trajectory "might not be smooth," but still likes the outlook for the stock. "While volatility may continue in the near-term, with the company remaining the market leader for streaming platforms, viewers and ad dollars still moving over to streaming at a fast rate and the stock trading at just ~4x guided CY22 revenue ... , we like the risk-reward over a 12-month time horizon," analyst Jeffrey Rand said in a March 27 note. Roku last week in its quarterly report posted sales that exceeded Wall Street expectations. PayPal is another name with fans on Wall Street. About two-thirds of analysts covering the stock call it a buy. The online payments system platform's shares more than doubled in 2020, but are about 70% below highs. Wells Fargo in April initiated coverage of PayPal with an overweight rating, saying its share price is near the lower limit. "We think shares' reset is overdone; we see operating tailwinds across platforms (core PayPal, Venmo) and product (online checkout) that we expect will persist and produce strong revenue/EPS growth post the lapping of eBay, driving shares higher," analyst Jeff Cantwell said in an April 4 note. PayPal also reported quarterly earnings last week, beating revenue expectations but lowering forward guidance. Etsy shares surged more than 300% in 2020, but shares are down about 50% this year. Still, more than half of analysts on Wall Street recommend the stock as a buy. The online marketplace reported earnings Wednesday after the bell, topping earnings estimates but issuing weak forward guidance. "ETSY, like most others across the space, remains in a transition period," Guggenheim analyst Seth Sigman said. "We like the strategic investments to elevate the ecosystem and believe that investors need to see how these efforts can support stronger share gains even without a rising tide." Wall Street is more cautious of other pandemic winners. Only about a quarter of analysts have a buy rating on Netflix , after the streaming giant reported a surprise subscriber loss in its latest quarter and shares saw a post-earnings meltdown. Other pandemic beneficiaries with scant approval include Moderna , BioNTech and Zillow . — CNBC's Michael Bloom contributed reporting.

Executives of Etsy applaud as they open the Nasdaq MarketSite ahead of Etsy's initial public offering in New York, April 16, 2015.

Michael Nagle | Bloomberg | Getty Images

Two years later, pandemic beneficiary stocks are darlings no more.