The stock market showed a big disconnect on Monday, and for a change, the Nasdaq Composite (^IXIC 2.24%) ended up on the short end of the stick. Even as some other market benchmarks pushed into positive territory, the Nasdaq was down more than 1.5% as of 1 p.m. EST.
The theme to start the new week was one of a prolonged economic recovery, and that made investors turn their attention to more traditional cyclical stock plays. In turn, they sold off many of their top-performing tech positions, especially those that were best suited to an economy under siege from the COVID-19 pandemic and other recent trends. That meant big sell-offs for some portions of the Nasdaq, and in particular, DocuSign (DOCU 2.74%) and Peloton Interactive (PTON 3.18%) took the brunt of the damage among Nasdaq-100 index component stocks.
A sign of things to come?
DocuSign shares were down more than 7% on Monday afternoon. Shareholders are seemingly associating the electronic signature specialist with pandemic conditions that required alternatives to in-person signatures for health reasons.
It's true that DocuSign benefited from dramatically increased demand during the lockdowns and travel restrictions that accompanied the early days of the pandemic. Under those conditions, DocuSign was the only choice for getting transactions and legal agreements completed.
Yet even once things get back to normal, it's strange to make the argument that DocuSign won't hang onto its newly expanded customer base. Electronic signatures are more convenient than having to go into a physical office and sign document after document until your hand's ready to fall off. It doesn't take a global health crisis to realize the value of remote signing alternatives.
Moreover, with signs of economic activity picking up, DocuSign should continue to have growth opportunities. Document-intensive transactions like home sales remain strong. Selling DocuSign based on a return to something closer to normal conditions seems short-sighted in that light, unless you have some reason to believe that transactional activity more broadly is likely to slow down.
Meanwhile, shares of Peloton Interactive fell more than 7%. The drop brought the interactive fitness equipment maker's stock decline to more than 22% since early January.
It's a little easier to understand the bearish argument for Peloton. If the pandemic is coming under control, then people will have more exercise options, including going back to gyms and fitness centers where equipment is already provided. Moreover, as winter approaches an end in the Northern Hemisphere, more people will feel comfortable with outdoor options once local public health restrictions get more amenable to exercise.
What remains to be seen, though, is how many people will stick with home workouts even after the pandemic is no longer a primary factor. Working out from the comfort of your own home has real advantages, including not having to bring changes of clothes to a gym. Meanwhile, the interactive technology provides many of the social benefits of a fitness club along with the ability to customize your experience to your tastes. That will inevitably appeal to some fitness enthusiasts even once gym life returns to normal.
For now, Peloton has a big order backlog and plenty of demand. If users remain enthusiastic even once alternatives become available, then it would disprove a big bear case and potentially help Peloton's stock claw back some of its lost ground.