Reasons These 10 Hot Stocks Might Not Survive 2021

From late February through mid-March 2020, the stock market took a severe hit, crashing 30% in just 40 trading days, the fastest such decline in market history. For some stocks, the drop was even more dramatic, with Norwegian Cruise Line, for example, falling from nearly $60 per share to $7.03. In spite of the fury of this drop, something remarkable happened shortly thereafter: The market turned around and rallied strongly, exiting the bear market in just 33 trading days. This made the bear market of 2020 the shortest ever.

Not only that, but the stay-at-home orders and global shutdown triggered by the pandemic turned some stocks into huge winners, as demand for their products skyrocketed. What follows is a list of 10 stocks that for whatever reason boomed in 2020 but that might face headwinds as they try to climb higher in 2021.

• Stock price as of March 12: $693.73

Tesla has always been a “story stock,” and story stocks have the potential to explode when the vision becomes reality. A perfect storm of factors helped boost Tesla stock by over 700% in 2020 alone. Over the span of the year, the company posted its first-ever annual profit, joined the S&P 500 index and enjoyed the effects of a short squeeze, in which investors who had borrowed the stock and sold it were forced to cover by buying shares back. Whether the company can fend off competition in the electric vehicle space — and sustain such a massive stock gain — are huge questions for 2021.

• Stock price as of March 12: $221.14

Esty was one of the biggest gainers of 2020, soaring over 300%. Although the company was already on the rise, the stay-at-home effects of the pandemic drove massive traffic to the online retailer. For the full year of 2020, Etsy reported astounding revenue growth of 129%. However, some analysts have the company growing revenue as little as 21% in 2021, which would likely make the stock’s 2020 gains unsustainable. While the company may thrive in the long run as an online retailer, it may be primed for some giveback in 2021. However, as of mid-March 2021, the company is still defying the naysayers, rising over 21% YTD. 

• Stock price as of March 12: $346.39

Zoom Communications is the epitome of a company having the right product at the right time. The company’s main videoconferencing product even became a verb in 2020, as users across the globe would “Zoom” with friends and family who could no longer gather together due to the global pandemic. Thanks to the combination of publicity and skyrocketing earnings, Zoom Communications stock posted a gain of 396% in 2020. This type of stock gain is appropriate for a company that posted revenue gains of 369% and earnings of nearly $1 billion. The big question for Zoom, of course, is whether or not businesses and consumers will continue to rely on videoconferencing as the pandemic recedes.

• Stock price as of March 12: $136.99

Moderna is another stock that had obvious reasons for being a winner in 2020, and indeed thus far into 2021, where it has posted additional gains of over 35% as of March 15. As one of the two main providers of coronavirus vaccine thus far, the company has enjoyed a windfall, both in terms of attention to its stock and actual earnings. After posting losses through 2020, the company is expected to post a whopping $21.51 in per-share earnings in 2021 However, those same analyst estimates forecast earnings to decline to $14.65 in 2022, $4.66 in 2023 and an actual loss of $0.33 per share in 2023. If these estimates hold true, support for the stock may evaporate.

• Stock price as of March 12: $60.81

L Brands, formerly known as Limited Brands, is the parent company of such beloved brands as Bath & Body Works and Victoria’s Secret. It might seem odd that a retailer would benefit in a year with a global pandemic, but L Brands stock doubled in 2020 and is up an additional 65% as of mid-March 2021. The company has found new favor on Wall Street as it has unveiled cost-cutting measures and renewed efforts to shed its iconic Victoria’s Secret brand, which has actually been a huge drag on company earnings. On March 12, the company reported rising earnings, reinstated its dividend and announced a share buyback and debt reduction plan, further fueling gains. If the company can deliver on its newfound promise, shares may continue higher. However, some analysts believe that L Brands is now overvalued, which may make further gains in 2021 a battle.

• Stock price as of March 12: $316.26

Wayfair was a huge beneficiary of the stay-at-home mandates of the coronavirus pandemic, much like its fellow online retailer Etsy. In 2020, Wayfair stock posted gains of 140%, and the trend has continued into 2021, with Wayfair up about 45% YTD as of mid-March. However, Wayfair will have to face the same questions that dog Etsy in 2021 and beyond, namely, how will these companies fare when the economy fully reopens and consumers are no longer forced to shop from home?

• Stock price as of March 12: $111.55

Peloton Interactive is another company with a perfect product for a pandemic. As consumers were forced to stay home and away from gyms during the pandemic, the stock of Peloton Interactive took off, soaring more than 440% in 2020. Certainly, the additional exposure the company received during the peak of the pandemic could sustain additional earnings growth into 2021 and beyond. However, there’s no doubt that some of the company’s users who were “forced” to work out at home will flood back into gyms and other in-person workout facilities as the coronavirus restrictions lift. Skittish investors have already sent the stock down over 26% year-to-date as of mid-March 2021, and additional losses may be in store once restrictions are fully lifted.

• Stock price as of March 12: $210.34

If you could imagine a company that was tailor-made for pandemic conditions, DocuSign would be it, as the company pioneered the development of e-signature technology. In an environment where people are restricted from meeting in person, such as during the global pandemic, there is no better way to get business done. As a result, DocuSign’s stock price exploded in 2020, gaining 194.2%. The company likely has a promising future, but it may face some giveback in terms of stock price in 2021 as in-person meetings return. As of mid-March 2021, the stock is in a bit of a holding pattern, down about 2% YTD.

• Stock price as of March 12: $67.68

Food delivery company GrubHub understandably enjoyed a pop in 2020, as stay-at-home orders and shuttered restaurants led to much more takeout dining. GrubHub stock rose about 57% in 2020 in response to this increased demand. However, as 2021 unfolds and restaurants reopen, food delivery companies like GrubHub may face a decrease in demand. As of mid-March 2021, GrubHub stock has declined nearly 10%, reflecting investor concern about the reopening of the economy. Coupled with the increase in competition from the likes of DoorDash and others, GrubHub may require a new catalyst to keep its stock up in 2021.

• Stock price as of March 12: $161.06

Never heard of Pinduoduo? You’re not alone. But once you know the story behind the company, you’ll understand why it returned a whopping 334% in 2020 alone. Pinduoduo is now the third-largest e-commerce company in China, behind more well-known names Alibaba and JD.com. Pinduoduo is a bit different in that it offers a “group buying” function, in which numerous buyers can join together online to help drive the price of a product lower. Coupled with the boom in e-commerce overall in 2020, the stock exploded. However, the company’s shares have given back about 11% YTD as of mid-March 2021, and the reopening economy — coupled with adjustments by the bigger players in the Chinese market — may restrict PDD’s gains in 2021.

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