We are now at the tail-end of arguably the most important earnings season, ever, as companies updated investors on business trends for the first time since the novel coronavirus pandemic shut down the global economy. The numbers themselves were pretty awful, with many questioning whether there were any decent stocks to buy during the rise of the pandemic.

More specifically, across the S&P 500, first quarter revenues were about flat, while profits dropped more than 13%, marking the biggest year-over-year profit decline since the third quarter of 2009, according to FactSet.

But they were also much better-than-expected. That is, heading into this earnings season, we all knew the numbers were going to be awful. They turned out to be noticeably “less awful” than we thought. About 58% of S&P 500 companies reported revenues above consensus expectations. About 66% topped profit expectations in the quarter.

Some companies aligned with digitization, e-commerce and digital media tailwinds absolutely crushed it this coronavirus earnings season — and their stocks have turned into red-hot stocks to buy that are leading the market higher. But the long-term case for some of these companies is less optimistic despite enjoying big wins this earnings season.

With that in mind, check out these hot stocks that absolutely crushed it this earnings season:

• Chegg (NASDAQ:CHGG)
• Beyond Meat (NASDAQ:BYND)
• Wayfair (NYSE:W)
• Overstock.com (NASDAQ:OSTK)
• Shopify (NYSE:SHOP)
• Facebook (NASDAQ:FB)
• Snap (NYSE:SNAP)
• LivePerson (NASDAQ:LPSN)
• ServiceNow (NYSE:NOW)
• Activision (NASDAQ:ATVI)
• EverQuote (NASDAQ:EVER)
• Spotify (NYSE:SPOT)
• Microsoft (NASDAQ:MSFT)
• Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
• Twilio (NASDAQ:TWLO)
• Lyft (NASDAQ:LYFT)
• Sprout Social (NASDAQ:SPT)
• Peloton (NASDAQ:PTON)
• Square (NYSE:SQ)
• PayPal (NASDAQ:PYPL)

Let’s take a closer look at what led to the success of each company as well as what investors might expect from their future.

Stocks That Stood Tall This Earnings Season: Chegg (CHGG)

In early May, digital education company Chegg reported breakthrough first quarter numbers that broadly implied that Chegg is in the first inning of taking over the education world. CHGG stock popped 30% to all-time highs in response to the strong numbers.

Specifically, Chegg’s first-quarter numbers comprised its biggest subscriber and revenue growth rates in recent memory, as students across the world pivoted to online learning platforms amid physical school closures. The company also said that second-quarter growth rates were trending ahead of first quarter growth rates, and that Q2 will be one for the record books.

This spike in growth is more than just a near-term phenomena. It’s the beginning of a multi-year virtualization mega-trend across the global education world.

It’s no secret that the education is world is behind when it comes to virtualization. Everything else in the world is done digitally. Education remains largely a physical experience. But Covid-19 has forced the education world to more robustly adopt digital tools. Students will find that they like these tools, because they are more adapted to their digital-focused lifestyles. As such, the students who have rushed to Chegg over the past few months, will likely stay on as long-term customers.

More than that, they will tell all their friends about Chegg. Those friends will join, too. And they’ll tell all their friends, who will also join. In other words, Covid-19 will spark viral, word-of-mouth marketing which will help Chegg’s platform grow like wildfire across the globe.

As that happens, Chegg will go from a few million subscribers today to tens of millions of subscribers over the next few years. All of that big growth will keep CHGG stock red-hot for the foreseeable future.

Beyond Meat (BYND)

Plant-based meat maker Beyond Meat reported strong first-quarter numbers in early May that whizzed past sell-side estimates and sparked a 20%-plus gain in BYND stock. Year-to-date, BYND stock is now up more than 60%.

BYND stock has been red hot this year because the plant-based meat growth narrative hasn’t lost a step amid the coronavirus pandemic. Sure, there’s been some weakness in the foodservice channel. But that weakness has been more than offset by out-sized strength in the retail channel, and Beyond Meat continues to grow revenues at an impressive 100%-plus pace.

In other words, even though consumer spending has fallen off a cliff in 2020, red-hot demand for plant-based meat has not.

This adds more firepower to the long-term bull thesis underlying BYND stock, which is that increasingly environmentally and socially conscious consumers will make plant-based meat a mainstream product over the next few years, due to its environmental and social benefits relative to traditional meat. As all that happens, Beyond Meat will turn into the “Tesla of plant-based meat,” leveraging branding and technology advantages to sustain leadership in a hyper-growth market.

So long as that long-term bull thesis continues to be supported by quarterly numbers, BYND stock will remain hot. That’s especially true since this is one of the most heavily shorted stocks in the market, meaning that there’s big short squeeze potential.

Wayfair (W)

Online retail stocks are on fire. But none have been as hot as furniture e-retailer Wayfair, who has seen its share price rise 800% over the past six weeks.

The catalyst? A shift towards online home furniture shopping amid the coronavirus pandemic, and a strong earnings report from Wayfair in early May, which confirmed that this company is benefiting in a big way from this shift.

Specifically, while Wayfair’s first-quarter numbers weren’t great, management said on the conference call that second-quarter gross revenues are trending up 90% year-over-year. That’s a big number. For perspective, first quarter revenues rose 20%.

Perhaps more importantly, management said the increased revenue scale in 2020 will create enormous margin tailwinds. Gross margins are expected to expand meaningfully to 26% in Q2, while adjusted EBITDA margins are expected to pop into positive territory.

Zooming out, the fundamentals supporting Wayfair remain favorable — this is the Amazon (NASDAQ:AMZN) of furniture, and the furniture market is increasingly migrating online — and so long as the current fundamentals continue to support the favorable big picture thesis here, Wayfair stock will stay hot.

Overstock.com (OSTK)

Left-for-dead online retailer Overstock.com reported surprisingly strong first-quarter numbers recently that breathed life back into this beaten up stock.

Specifically, amid Covid-19, physical stores across the globe have closed their doors. Commerce activity has migrated into the online channel. This has created huge tailwinds for Overstock.com, whose revenue growth rates have reversed course from down 19% in the fourth quarter of 2019, to up 120% in April.

The huge turnaround in growth trend has been reflected in the stock price. From it’s mid-March lows, Overstock.com stock is up a jaw-dropping 5,500%.

Sure, you could write this off as a one-time phenomena, brought on by a once-in-a-lifetime Black Swan event in a global pandemic. But it’s not. This is a seminal moment in the retail industry, which will permanently accelerate the e-commerce transition and push previously offline-heavy retail categories into the online channel for good.

One of those offline-heavy retail categories is home goods. Overstock.com is one of the five major players in the U.S. furniture e-retail market.

It doesn’t take a rocket scientist to connect the dots. Overstock.com is on the cusp of breakthrough growth over the next few years, the likes of which will drive OSTK materially higher from current levels.

Shopify (SHOP)

E-commerce solutions provider Shopify has been one of the hottest stocks in the market for a long time. From its 2015 IPO price, Shopify stock has roared 4,200% higher.

That rally only gained more momentum this earnings season.

Long story short, Shopify reported first-quarter revenues and profits in early May that were well ahead of expectations, and reported that second-quarter growth trends are pacing ahead of red-hot first-quarter growth trends, all because commerce activity is rapidly pivoting online amid Covid-19-related physical store closures.

SHOP stock popped more than 5% to all-time highs on the strong print, bringing its year-to-date gain to 83%.

But a big first quarter earnings report is just the tip of the iceberg here. In the big picture, Shopify is the backbone of small-to-medium sized business (SMB) e-commerce. Covid-19 has sparked a seminal moment in SMBs towards more widely adopting e-commerce, wherein the number of SMBs who don’t have an online presence will fall from 40% today, to 0% within the next few years.

As that happens, Shopify will sustain huge merchant, volume, revenue and profit growth. All of that big growth will keep SHOP stock on a winning path.

Facebook (FB)

Remember when the talk on the Street was that a global economic slowdown in March and April was going to cause a digital ad recession across the world? Well, that recession didn’t hit Facebook. And because it didn’t, FB stock is up more than 50% from its March lows.

In late April, the social media and digital advertising giant reported better-than-expected first quarter numbers and gave a strong update on April sales trends. Specifically, Facebook said that first-quarter revenues rose 18%, and that despite a huge slowdown in ad sales in March, April ad sales have been trending flat year-over-year.

Take a step back. Read that again. Facebook’s April ad sales were flat year-over-year. In April, the U.S. economy shrunk by more than 10% year-over-year.

What’s the conclusion? Facebook is such a valuable part of ad budgets across the globe, that it’ll take more than a global economic shutdown to get advertisers to stop spending money through Facebook.

This resiliency — coupled with the fact the Facebook has ample room for growth through increased ad real estate on WhatsApp and Messenger and increased e-commerce capability on all four of its platforms — will keep FB stock on a winning trajectory for the foreseeable future.

Snap (SNAP)

Another digital ad company that reported surprisingly strong first-quarter numbers was Snap.

In late April, Snap reported first-quarter numbers that topped revenue and profit expectations by a mile. In sum, the strong report had four positive takeaways:

1. Snap was on fire before the novel coronavirus outbreak. Revenues were up a jaw-dropping 58% year-over-year in January and February.
2. The company has weathered the coronavirus storm in March and April with impressive resilience. Revenues were up 25% in March. As of the print, they were trending up 15% in April.
3. All important financial trends continue to move in the right direction. Gross margins came in at 47%, up 8 percentage points year-over-year. The opex rate came in at 64%, down 13 points. Adjusted loss shrunk from $123 million a year ago, to $81 million.
4. SNAP stock is back on track to retake the $20 level in 2020. The fundamentals imply that Snap has enough long-term earnings growth power to warrant the stock at $20 by the end of the year.

All in all, Snap’s first quarter earnings report was fabulous — good enough that the current red-hot rally in SNAP stock should persist for the foreseeable future.

LivePerson (LPSN)

In early May, conversational commerce company LivePerson reported first-quarter numbers which were good enough to send LPSN stock up more than 40% in one day — and most of the quarter’s strength can be attributed to the coronavirus pandemic.

When the pandemic struck across the globe, physical businesses everywhere closed. Amid widespread physical business closures, retailers and merchants had to pivot online. This created a surge in demand for e-commerce solutions in March and April. LivePerson’s AI-powered conversational commerce tools were no exception to this trend.

The company saw demand for its tools surge amid the global economic shutdown, powering 10% deal volume growth and 18% revenue growth in the first quarter. Second-quarter revenues are expected to rise by about 20%, too.

Perhaps most importantly, LivePerson will remain an approximate-20% revenue grower for the next several years. Conversational commerce is the next big breakthrough in e-commerce, as AI technology improves chatbot performance and consumers increasingly interact with and transact through smarter chatbots.

LivePerson will be the technology company powering that massive conversational commerce breakthrough. As such, this company is a long-term winner, and LPSN stock will perform very well over the next three to five years.

ServiceNow (NOW)

Long before Covid-19 marched into town, digital workflows giant ServiceNow was a big winner. Over the past five years, NOW stock has risen nearly 1,400%.

Then ServiceNow reported quarterly numbers in late April which underscored that this company’s winning streak will only get hotter thanks to a global pandemic.

Long story short, in a world of physical store closures and virtualized offices, digital workflows aren’t just a nice-to-have — they are necessary-to-operate solution. ServiceNow’s Now Platform is widely considered the best, all-in-one digital workflows platform out there. Consequently, over the next few years, ServiceNow should become ubiquitous across the big enterprise landscape.

That trend is starting today. In the first three months of the year, ServiceNow reported 30% big customer growth, nearly 50% big contract growth and over 30% revenue growth.

The company will sustain big growth momentum for the next few years amid widespread and robust digitization tailwinds. This sustained big growth momentum will keep NOW stock on a winning path.

Activision (ATVI)

Everyone is staying at home these days, so it should be no surprise that everyone is spending more time and money on video games.

That was crystal clear in Activision’s first-quarter earnings report.

Not only did Activision smash usage, revenue and profit estimates in the quarter — paced by strong business momentum in March — but management also unveiled a second-quarter guide that called for 20%-plus revenue growth.

Activision hasn’t had a 20%-plus revenue growth quarter in forever. Now, it looks like the company may have a streak of them.

That’s why ATVI stock is up 25% year-to-date, and at its highest levels since late 2018.

Still, I’d caution against chasing this rally. The stock is priced for perfection, with the forward earnings multiple currently matching its highest levels of the past 10 years. That’s not to say ATVI stock won’t go higher from here. It probably will. But not by much in the near-term.

EverQuote (EVER)

Long before the coronavirus pandemic came to town, small online insurance marketplace EverQuote was on a winning streak. In 2019, EVER stock rose more than 600%, on the back of 50%- plus usage and revenue growth.

In the first quarter of 2020, that already hot growth narrative got even hotter.

Usage on the EverQuote platform rose 80% year-over-year. Revenues rose 56%. Profit margins expanded more than 700 basis points. Wide losses in the year ago quarter, turned into big profits.

The catalyst for the growth acceleration? According to management, Covid-19 is “accelerating the shift online in insurance.”

This acceleration has a lot of runway. Only about 19% of insurance budgets are spent online. That compares to 45% digital ad spend penetration in other verticals like travel, lodging and auto.

As consumers continue to pivot towards buying insurance online over the next few years, insurance ad dollars will continue to flow online, too, and EverQuote — as the world’s leading online insurance marketplace — will sustain huge growth.

Spotify (SPOT)

Much as they have with video games and streaming TV services, consumers have spent more time and money on streaming music platforms amid the coronavirus pandemic.

This simple truth enabled Spotify to report strong first-quarter numbers that sent SPOT stock up to 52-week-highs.

Specifically, Spotify reported strong user, revenue and profit growth in the first quarter. Premium subscribers rose 30% year-over-year. Revenues were up 22%. Gross margins expanded 80 basis points. Its operating loss compressed by more than 60% versus the year ago quarter.

Overall, it was a strong quarter.

But — while Spotify has big long-term growth potential in the growing global streaming music space — most of that upside is already priced in. Plus, Spotify is guiding for weakening growth trends in Q2 and for the balance of the year, mostly due to weaker ad spending on the platform. To make matters worse, Spotify stock is running head-first into the $160 level, which has proved as a strong resistance level for this stock six times since early 2019.

Net net, I’d be wary of the recent rally in Spotify stock. It may be on its last legs.

Microsoft (MSFT)

There was a point in time when the consensus thesis on Wall Street was that the coronavirus pandemic was going to kill IT spending trends and create huge headwinds for Microsoft’s red-hot cloud business.

In late April, Microsoft reported earnings that completely blew apart that thesis.

IT spending is down. But cloud spending is not. Instead, cloud spending is up, because enterprises are accelerating their cloud transformations amid physical business closures. This acceleration is sparking supercharged demand for Microsoft’s cloud-hosted infrastructure, productivity and communications services.

Azure revenue rose 61% last quarter. Office 365 commercial revenue rose 27%. Dynamics 365 revenue rose 49%. Teams grew its daily active user base by 70% from the previous quarter.

Supercharged demand for these cloud-hosted services will persist for the foreseeable future. As it does, the current rally in MSFT stock will stay alive.

Alphabet (GOOG)

Alphabet’s first-quarter numbers were very good, and broadly underscored four things.

First, Alphabet’s ad business is struggling, as expected. But, it’s also weathering the Covid-19 storm with impressive resilience, and will rebound quicker than most anticipated, with ad revenue trends on YouTube and Google both stabilizing in April.

Second, the Google Cloud business is on fire — revenues rose 52% year-over-year in the quarter — and will sustain strong momentum for the foreseeable future behind broad corporate virtualization tailwinds (virtualized offices require more cloud computing space).

Third, Alphabet’s various other products — like Google Play (downloads up 30%), Google Classroom (doubled its users base since March) and Google Meet (engagement up 30-fold since January) — are seeing a surge in demand amid Covid-19. Sustained strength in these non-core businesses should help offset some ad weakness.

Fourth, Alphabet stock is still dirt-cheap relative to its long-term growth prospects, and $1,500 prices look reachable this year.

Twilio (TWLO)

Cloud communications leader Twilio reported blockbuster first-quarter numbers in early May, that crushed expectations and included a strong guide.

TWLO stock shot up 40% in response. Year-to-date, shares are now up nearly 90%, and trade at all-time highs.

While I love Twilio stock as a long-term investment — companies are increasingly pivoting towards cloud-based, B2C text message communications and Twilio offers best-in-breed software solutions in that vertical — I caution against investors chasing this rally.

Here and now, the valuation is just too rich at 20-times trailing sales. Twilio stock has only been this richly valued twice before: September 2016 and July 2019. Both times, the stock failed to hold the rich valuation, proceed to peak and then dropped substantially over the following few months.

History may repeat itself here. As such, I’d wait for a dip before buying into this red-hot growth stock.

Lyft (LYFT)

Ride-sharing giant Lyft has been one of the biggest losers amid the coronavirus pandemic. But LYFT stock reversed course sharply and popped in a big way after the company reported much better-than-expected first-quarter numbers.

Lyft’s numbers across the board in the first three months of the year were pretty good. Riders rose 3%. Average revenue per rider rose 19%. Revenues were up 23%. Gross margins expanded more than seven points. The opex rate improved by more than ten points. Operating margins expanded by more than 17 points. Contribution margins hit a record high.

Sure, Lyft’s growth trends fell off a cliff in April. Ridership in April dropped 75% year-over-year. But, Lyft did say that ridership trends had seemingly bottomed, with ride volume up for three consecutive weeks since mid-April.

LYFT stock surged on the news. It has since given up a lot of those gains.

But the stock will come roaring right back. In the big picture, the ride-sharing market will rebound once virus fears abate and consumer activity normalizes. Lyft will win in this rebound because the company is making all the right moves today to streamline the cost structure and improve profit margins.

Net net, by 2021, Lyft’s demand trends should be back to normal, and margins should be at record highs. That’s a combination which should have LYFT stock at much higher prices than where it sits today.

Sprout Social (SPT)

As the physical economy has shut down, companies have pivoted their efforts and resources into the digital economy. That’s good news for Sprout Social, which reported in early May that demand for its social media management software has remained robust amid the pandemic.

Specifically, Sprout Social reported that first-quarter growth rates accelerated across the board. Revenue growth accelerated from 26% in Q4, to 31% in Q1. Organic revenue growth accelerated from 37% to 41%. Annually recurring revenue growth accelerated from 27% to 30%. Customer account growth (for accounts over $10,000) accelerated from 57% to 58%.

The whole growth narrative picked up momentum.

And it will sustain robust momentum for the rest of the decade. Because 3.8 billion people across the globe spend two and a half hours each day on social media, social media has become an integral part of the customer experience, and having a good brand has become synonymous with having a good social media presence.

Yet, “less than 5% of the 90 million businesses on social media” use management software to optimize their social presence. That number will rise exponentially over the next decade. Social media management software will become ubiquitous across the enterprise landscape.

As it does, Sprout Social — regarded as one of the top players in this space — will sustain huge revenue growth. That will lead to huge profit growth, which will lead to huge gains for SPT stock.

Peloton (PTON)

Gyms everywhere are closed, and that has proven to be an enormous tailwind for at-home fitness bike maker Peloton.

Peloton reported superb third-quarter numbers in early May that underscored that the company’s growth narrative is on fire. In the quarter, subscribers rose 94%, revenues rose 66% and total workouts rose 145%. What’s more, Peloton expects things to only get better. In the fourth quarter, management is guiding for 104% subscriber growth and 128% revenue growth.

Clearly, consumers are turning to Peloton bikes to stay in shape amid gym closures.

But gyms won’t be closed forever. They will re-open. Sure, there will be some consumer hesitancy to get back into gyms once they re-open. But that hesitancy will fade over time, and once we get a vaccine for Covid-19. As that hesitancy fades, demand for Peloton bikes will fall off a cliff, and the red-hot Peloton growth narrative will fall flat.

That’s bad news for PTON stock, which has shot up to extreme valuation territory amid supercharged demand trends. As those demand trends slow in coming quarters, PTON stock will fall.

Square (SQ)

Payments processor Square was supposed to report awful first-quarter numbers. After all, the company is built on the back of physical, small business commerce. That world was completely shut down in March.

Instead, thanks to innovation and growth in its digital businesses, Square reported strong first-quarter numbers that blew depressed estimates out of the water.

Specifically, Square topped revenue expectations on the back of a surge in Square Online Store payment volume, record high Cash App user growth, and gangbusters bitcoin-related revenue growth. All of that, coupled with what was still strong 14% payment volume growth in the quarter, led to the company reporting numbers, which gave the market a lot of confidence.

SQ stock has skyrocketed ever since to pre-Covid-19 levels.

This strength in SQ stock will persist. Over the next few months, Square’s red-hot digital businesses will sustain robust momentum, while core physical GPV trends will mount a comeback as the economy gradually re-opens. This double tailwind will provide SQ stock with enough firepower to sustain the current rally.

PayPal (PYPL)

Last, but not least, on this list of hot stocks that crushed in this coronavirus earnings season is online payments processor PayPal.

PayPal’s first-quarter numbers themselves weren’t that good. Volume growth slowed sequentially. Engagement growth slowed sequentially. Revenue growth slowed sequentially.

But, on the first-quarter conference call, CEO Dan Schulman said April was the company’s strongest month ever since its IPO in terms of user and engagement growth, as consumers adjusted to the “new normal” and shifted towards online, contactless payment methods.

PYPL stock popped to all time highs on the news.

I’d be wary of this rally. PayPal is winning because of a shift towards online payments. But the company is also losing because consumer spending is falling off a cliff. The former is fully priced into PYPL stock. The latter is not.

Going forward, I think the rally in PayPal stock will fall flat amid building valuation friction.