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Nasdaq at Record High Again; Peloton Climbs on Gym Fears; DraftKings Shrugs Off Sports Closures

By Dan Caplinger – Aug 18, 2020 at 4:26PM

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There's no stopping the tech-heavy index.

For the second day in a row, the Nasdaq Composite (^IXIC 0.25%) closed at an all-time high. Substantial gains concentrated among the seven largest stocks in the Nasdaq-100 Index had a significant impact on the broader Composite as well, and investors seem to have no concerns about the potential for failure on issues like COVID-19, economic stimulus, or geopolitical relations. Both Nasdaq indexes finished the day with gains in the neighborhood of 0.75% to 1%.

Beyond the largest stocks on the Nasdaq, though, there were also some companies that stood out. Peloton Interactive (PTON -0.24%) has soared in the coronavirus pandemic, and even the prospects for reopening couldn't hold the stock back today. Meanwhile, DraftKings (DKNG 5.00%) faces the fallout from decisions to shut down some sports leagues, but investors don't seem worried about their being a lack of games for the sports-wagering company's customers to bet on.

Leader of the pack

Peloton saw its shares rise more than 7% Tuesday. The maker of interactive treadmills and stationary bikes might seem threatened by the reopening of gyms, but investors don't seem to think the trends favoring in-home exercise will reverse anytime soon.

Person at home lifting hand weight next to treadmill with video screen on.

Image source: Peloton.From approved media kit-https://press.onepeloton.com/#tread

New York expects to allow gyms to reopen on Monday, Aug. 24 under the state's phased reopening plan. Fitness establishments have been closed for months, and many had thought that Peloton's stock might give up ground once exercise fans got a chance to get out of their homes.

Yet it's far from certain that gym customers will want to go back. Under New York's guidelines, capacity will be limited to one-third normal levels. Those exercising will have to wear masks, which can be especially challenging during intense aerobic activity. In that light, using a Peloton machine in the comfort of your own home looks a lot more attractive.

Moreover, the threat of new outbreaks could force other states to close gyms down again even after they've opened. That all feeds Peloton's business model, and especially when the weather gets less conducive to exercising outside, sales could surge once again.

No NCAA? No problem

Elsewhere, shares of DraftKings also climbed 7%. The sports-betting company's stock has continued to perform well even with pressures from a lack of sporting events; despite some uncertainty about what the fall season will bring, investors seem comfortable with the current situation.

Last week, DraftKings released its second-quarter results. The company managed to boost sales by 24% despite there being little or no activity in baseball and basketball in the U.S. during the period. Higher costs weighed on bottom-line performance, but DraftKings looks forward to a return to more normal conditions in the third quarter.

Since then, the news has been mixed. On one hand, baseball, basketball, and hockey have resumed, and pro football is also likely to make a comeback. However, it appears that college football could see big disruptions to the normal season, and some are even starting to call into question whether winter basketball will be good to go on time.

DraftKings has successfully pivoted to provide customers with entertaining options regardless of what sports are available. Today's gains seem to acknowledge that fact. Certainly, if the major leagues remain open, there'll be plenty for DraftKings to offer.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$8.20 (-0.24%) $0.02
DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$15.32 (5.00%) $0.73
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$10,829.50 (0.25%) $26.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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