After months of declines, stock markets often give investors a day when they rebound substantially. That day came on Friday, when Wall Street seemed to come to the conclusion that the accelerated slowdown of recent weeks had gone too far. The major market benchmarks were all up that day, and the Nasdaq Compound (^IXIC 3.82%) led the way with a 3.3% gain at 2 p.m. ET.
However, a number of stocks rose more than 10%. However, few had company-specific news supporting their moves, and the gains only recovered some of the ground they had lost since last year.
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Friday’s big winners
Among Nasdaq-100 stocks, the following stocks posted the largest gains on Friday afternoon:
- Electric vehicle company Lucid Group (LCID 14.79%) led the way with a 14% increase.
- DocuSign (DOCU 13.36%) gained almost 13%.
- Cybersecurity performed well, with Z-scale (ZS 11.34%) and CrowdStrike Holdings (CRWD 11.79%) both gain 11%. Okta (OKTA 11.41%) was 10% higher on the day.
- Same Focus on video communications (ZM 11.62%) was up 10% on Friday afternoon.
There was very little fundamental economic news to justify the moves of any of these stocks. Indeed, in many ways, it appears to have been the lack of news that prompted the pause in their respective downturns.
Almost all of these stocks have been the target of angst from Wall Street analysts over the past few weeks. Lucid saw its stock target cut by 20% on Monday, and it has consistently posted above-average short-selling interest. DocuSign faced multiple downgrades earlier in May amid skepticism about its ability to maintain momentum in the early stages of the COVID-19 pandemic. Even today, Zoom got a price target of $30 from analysts at BTIG, setting a new figure of $150 per share. Zscaler, Okta, and CrowdStrike have seen similar cuts and downgrades recently.
Long-term fundamentals vs. short-term stock prices
What is clear from the market action today is that just as many investors have been selling these stocks indiscriminately as their stock prices have fallen, so have some who are buying them indiscriminately. upward discernment. The prospects for these companies look promising in the long term, but some of them have better prospects than others.
For example, cybersecurity needs are only growing in importance as geopolitical conflicts increase. This should help businesses providing these services attract customers, even if their needs differ, which could lead business customers to switch to different providers. By contrast, it’s unclear how successful Zoom will be in continuing to push people into video conferencing, and its efforts to expand the reach of its business have been mixed at best so far.
Perhaps most importantly, it’s crucial not to make too many gains in one day. Even after today’s gains, the six stocks above are down between 12% and 33% over the past month. They are still down around 50% to 85% from their all-time highs, and there is no guarantee that they will ever be able to regain the lost ground, let alone in a short period of time.
Optimism is a favorable trait for investors, but preparing for eventualities that are not the best-case scenario is a smart thing to do. Whether a stock is up or down, it is best to keep an eye on the likely performance of the company. This can help you maintain a long-term mindset, even in an environment of high two-way volatility for the stock price.
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