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This makes a lot of sense but then shouldn't this apply to stocks like Netflix or Peloton. That once the people get back to work and gyms, these companies will

• mlthoughts2018 6y ago
  No, it doesn’t work the same way because investors will already take this into account when modeling the future cash streams available. They will say, “in year X we expected the business to obtain $FOO cash flow due to increased usage during a pandemic stay-home order. But this anomalous usage doesn’t mean the company “lost” any growth if it’s numbers aren’t as strong later, instead we expect it to have $BAR cash flow in normal times.” In other words, temporarily gaining more revenue in a way that does not jeopardize the regularly predicted revenue in other times will not create a “permanent” lack of growth, under any reasonable model of discounted net present value. The only way it could have an effect like that is if it put some type of limitation or burden that reduced capacity for business later. For example, consider a toilet paper company instead of Netflix. Everyone rushes to buy tons of toilet paper right now, which looks like amazing revenue growth, but investors will ask if everyone is going to have the same demand later. Eventually there will be an issue between the supply chain to make that much toilet paper and the stored up stockpiles of people who don’t need to buy more. Some companies could go bust during that event, others might have cash reserves or other lines of business, and the effect on stock price will be related to these.