Could Stay-at-Home Stocks Stay Strong in 2022 Amid the Omicron Scare?

Stay-at-home stocks whipsawed in 2021, hitting new highs at the beginning of the year but then falling amid higher bond yields. More recently, however, with the identification of the omicron variant, stay-at-home stocks have regained momentum.

Despite this turnaround, most stay-at-home stocks are still down this year. What’s their 2022 forecast? Could they recover as COVID-19's omicron variant spreads?

While the medical community is still studying how effective current vaccines are against the omicron variant, preliminary research shows that some—namely AstraZeneca, Johnson & Johnson, and Chinese and Russian vaccines—offer almost no defense against the omicron variant. Moderna's and Pfizer's appear effective with a booster shot. Although the omicron variant seems a lot less lethal than other variants, many countries are imposing restrictions to slow omicron's spread.

Stay-at-home stocks were having a dismal year before the omicron variant's emergence, with Peloton, DocuSign, Teladoc Health, Zoom Video Communications, and Chegg falling to new lows.

The markets’ reaction isn't hard to understand. Stay-at-home companies' top-line growth in 2021 has been a fraction of their growth in 2020. Zoom, for instance, reported revenue growth of 88 percent in fiscal 2020 (ended Jan. 2020), and then 325 percent the following year as the pandemic boosted demand for its services. The company’s revenue growth is expected to slow to 53.9 percent this fiscal year, and then 16.4 percent in the next.

Some stay-at-home companies have become an indispensable part of our lives. The world seems headed for a hybrid model, where working from home and office move hand-in-hand. Similarly, home gyms could coexist with gyms, with the two complementing each other.

After their dismal 2021, stay-at-home stocks are set to fare better in 2022. These companies won't face the tough year-over-year comps they did in 2021, and the spread of the omicron variant should revive demand and boost market sentiment. Some stay-at-home stocks also look quite attractive from a valuation perspective.

Amazon is the top 2022 stay-at-home pick for many analysts. Zoom Video Communications is another stay-at-home stock that should perform well.

Other stay-at-home stocks with a strong outlook include Teladoc Health, which should benefit from the digitization of the healthcare market, and Peloton. Despite its slowing growth and struggle to control damage to its brand after a fatal accident, the exercise equipment maker looks like a good buy at its current valuation.