Please ensure Javascript is enabled for purposes of website accessibility

The 2 Nasdaq Stocks Investors Feared the Most on Monday

By Dan Caplinger - Updated Feb 22, 2021 at 3:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Both stocks took advantage of trends that helped them soar in 2020.

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.

Person with hands in front of face looking at laptop screen.

Image source: Getty Images.

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.

Riding lower

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DocuSign Stock Quote
DocuSign
DOCU
$79.83 (2.74%) $2.13
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,690.83 (2.24%) $256.09
Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$13.46 (3.18%) $0.41

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.