Monday was a good day for most stocks, but many of the stay-at-home darlings corrected sharply. The whiff of a potential COVID-19 vaccine had investors fleeing some of this year's hottest stocks. Some are calling it a long overdue sector rotation, but I call it an opportunity.
Shares of DocuSign (DOCU 3.11%), Logitech (LOGI 2.94%), and Peloton Interactive (PTON 7.29%)plummeted at least 15% on Monday. They're not going to stay down for long.
DocuSign: Down 15%
No company dominates the e-signatures market the way DocuSign does these days, and the timing here was perfect. With the pandemic keeping folks socially distant, there's been no point in requiring wet signatures. DocuSign is rolling in this climate, with revenue soaring 45% in its latest fiscal quarter and billings soaring 61%.
Wall Street can't keep up with the "beat and raise" speedster, and it has beaten analyst profit targets by triple digits in three of the past four quarters. DocuSign has been building out its ecosystem, making the most of its pole position.
Let's play the bearish thesis out. Say a viable vaccine his the market in a few months, and a year or so from now, we're back to business as usual. Is this really the end for DocuSign? Many people will not go back to ink signatures now that e-signatures have gained legitimacy. DocuSign will only grow in popularity. The last time the shares closed below $200 -- nearly two months ago -- the opportunity didn't last long.
Logitech: Down 19%
The Swiss peripherals and accessories specialist has spent the last four decades making mouse controllers, webcams, and other essential consumer electronics. It's not typically considered a shelter-in-place growth darling. However, its dramatic top-line acceleration over the past year -- going from single-digit gains in back-to-back years to 14%, 25%, and then 75% growth in the past three quarters -- is going to turn a few heads.
Logitech has become the thinking investor's Zoom room play. If you're videoconferencing for work, school, or family calls, you'll probably use Logitech webcams, USB headsets, Bluetooth tablet keyboards, and other accessories. It has historically been a sleepy stock, but its shares had more than doubled heading into this week before Monday's 19% drop.
Logitech will be back. Growth was going to decelerate anyway at this point, but this isn't the end of demand for home tech upgrades. We're not going back exclusively to in-office meetings, in-school education, and in-person social gatherings. There will be more Logitech gadgetry around your home a year from now than there was pre-pandemic -- and what's more, the company also provides office solutions.
Peloton: Down 20%
Streaming video and in-home fitness have gained popularity that isn't going away after COVID-19 has run its course. The pandemic accelerated the paradigm shift, but there's no turning back at this point. Peloton is a perfect example. It was one of the hardest-hit stocks on Monday, losing a little more than a fifth of its value.
But do you really think Peloton is toast now that a potential coronavirus treatment is on the table? Will someone who spent roughly $2,000 on a Peloton stationary bike (or twice that much on a treadmill) just let it collect cobwebs and flock back to spin class? Under cover of COVID-19, Peloton has scaled its membership base. The network effect has taken over here. Its connected fitness subscriber base has more than doubled over the past year, and it can't make its workout gear fast enough to keep up with demand.
DocuSign, Logitech, and Peloton are posting accelerating revenue growth in the new normal, but they're that much more important right now. They're great growth stocks, and they won't stay down for long.