After months of declines, stock markets often offer investors a day on which they rebound substantially. That day came on Friday, as Wall Street seemed to come to the conclusion that the accelerated downturn in recent weeks had gone too far. Major market benchmarks were all up on the day, and the Nasdaq Composite (^IXIC -1.61%) led the way higher with a gain of 3.3% as of 2 p.m. ET.
However, a number of stocks were up more than 10%. Few of them had any company-specific news supporting their moves, though, and the gains only clawed back a portion of the ground they've lost going back to last year.
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Friday's big winners
Among Nasdaq-100 stocks, the following stocks posted the biggest gains on Friday afternoon:
- Electric vehicle company Lucid Group (LCID -5.69%) led the way with a 14% rise.
- DocuSign (DOCU -0.43%) gained almost 13%.
- Cybersecurity did well, with Zscaler (ZS -2.00%) and CrowdStrike Holdings (CRWD -1.74%) both gaining 11%. Okta (OKTA -1.91%) was higher by 10% on the day.
- Even Zoom Video Communications (ZM -1.77%) saw a 10% rise on Friday afternoon.
There was precious little in the way of fundamental business news to justify moves in any of these stocks. Indeed, in many ways, it seemed to be the lack of news that motivated the pause in their respective downturns.
Just about all of these stocks have been targets of Wall Street analyst angst in over the past few weeks. Lucid had its stock target cut by 20% on Monday, and it has regularly sported above-average short-selling interest. DocuSign faced multiple downgrades earlier in May amid skepticism about its ability to keep up its momentum from the early stages of the COVID-19 pandemic. Even just today, Zoom got a $30 price target cut from analysts at BTIG, setting a new figure of $150 per share. Zscaler, Okta, and CrowdStrike have seen similar reductions and downgrades recently.
Long-term fundamentals vs. short-term stock prices
What's evident from today's market action is that just as many investors indiscriminately sold these stocks as their share prices fell, so too are some buying them indiscriminately on the way up. The prospects for these companies look promising in the long run, but some of them have stronger prospects than others.
For instance, cybersecurity needs are only becoming more important as geopolitical conflict rises. That should help companies providing those services attract customers, albeit with differing needs potentially driving enterprise clients toward different providers. By contrast, it's unclear how successful Zoom will be in continuing to push people toward videoconferencing, and its efforts to expand the scope of its business have been mixed at best thus far.
Perhaps most importantly, it's crucial not to make too much of one-day gains. Even after today's climbs, all six of the stocks above are down between 12% and 33% over just the past month. They're still down roughly 50% to 85% from their all-time highs, and there's no guarantee that they'll be able to recoup their lost ground ever, let alone within a short period of time.
Optimism is a favorable trait for investors, but preparing for eventualities that fall short of the best-case scenario is a smart thing to do. Whether a stock is rising or falling, it's best to keep your eyes on how the business is likely to perform. That can help you maintain a long-term mindset even amid high volatility in both directions for the stock price.
