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Here's Why Tech Stocks Like Twilio and Zendesk Are Soaring Today

The Motley Fool
The Motley Fool
 2021-12-07

What happened

It's a good day for the market as a whole, but it's a great day for a handful of technology stocks.

MicroVision (NASDAQ: MVIS) and SentinelOne (NYSE: S) are leading the charge with gains of 13.2% and 13.1%, respectively, as of as of 12:12 p.m. ET Tuesday, closely followed by Pinduoduo (NASDAQ: PDD) with its 12.8% advance. Several other familiar names like Twilio (NYSE: TWLO) , Zendesk (NYSE: ZEN) , and StoneCo (NASDAQ: STNE) aren't far behind. Investors are now shrugging off the potentially adverse impact of the omicron variant of the coronavirus, unwinding the steep sell-offs this latest mutation prompted last week.

So what

If you're looking for news from (or even about) any of the six aforementioned technology companies , don't bother. It doesn't exist. In fact, you could also swap out these six stocks with any other six tech stocks rallying firmly today and once again not find any company-specific news behind the gains. That's because the rally is being driven by something much bigger: a change of heart. Traders don't fear the fallout of the omicron variant of the coronavirus as much as they did a week ago, when so little was known about it.

That's not necessarily a misstep, either. While certain travel restrictions have already been imposed here and abroad to curb the spread of omicron, this particular strain thus far seemingly results in milder symptoms and potentially fewer hospitalizations. Bolstering the bullish bounce is word from drugmaker GlaxoSmithKline that its antibody sotrovimab is an effective treatment for omicron-based infections. It's still not clear if most of the existing vaccines are capable of effectively preventing the contraction of the latest variant of the virus.

https://img.particlenews.com/image.php?url=2nXqi5_0dGRPRMN00

Image source: Getty Images.

That being said, investors and prospective buyers of any of these technology names should also know that the latest pandemic headlines may mean less for the market than news out of China. That is, on Monday, China's central bank opted to lower its reserve requirement for the country's banks. Lowering the amount of money required to be held in reserve means more of that money can be loaned and ultimately spent, producing an economically stimulative effect. All told, the move frees up another $188 billion that can now be freely circulated among China's businesses and consumers.

China's updated monetary policy and investors' willingness to dismiss risks related to omicron is buoying all stocks. But, the market is saying -- by virtue of its buying -- that it supports technology stocks.

Now what

It's tricky. The superficial if/then relationship makes enough sense: If omicron isn't much of a risk and if China is doing what it can to stimulate its (and the world's) economy, then the recent stock sell-off is unmerited. And, in that the previously mentioned stocks like Pinduoduo, Twilio, and SentinelOne were among the hardest hit names once omicron surfaced, it makes sense that they and most of their tech peers rate as Tuesday's biggest winners.

If today's big gains are the only thing to like about any of these six stocks though, that's not enough of a reason to step in now. Ironically, prospective buyers should look at all six of these companies through the same lens through which there were looking at them just two weeks ago, before the omicron variant had surfaced. While the headlines in the meantime have been riveting (and even a little frightening), this latest chapter of the pandemic's story doesn't actually change anything about these companies' growth prospects, and changes very little about their stocks' value.

This of course means would-be buyers must still weigh each of these stocks on a case-by-case basis.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Stoneco LTD, Twilio, and Zendesk. The Motley Fool recommends GlaxoSmithKline. The Motley Fool has a disclosure policy .

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