Some stocks that perhaps flew too high, too soon have been on sharp descents lately. Shares of Peloton Interactive (PTON +8.85%), Zoom Video Communications (ZM +3.07%), and Tesla (TSLA +3.14%) were market darlings just a couple of weeks ago. Sentiment has turned in the recent market correction, and all three of them are now trading at least 20% below their all-time highs.
It won't always be that way. All three have the right ingredients to get back on track. Let's see why this trio of stocks can hit fresh highs later this year, thumping the market yet again in the process.
Image source: Getty Images.
1. Peloton Interactive
The first two names have a lot in common. Peloton and Zoom Video became poster children of the new normal during the early stages of the pandemic, only to be discarded when the COVID-19 vaccines started hitting the market. Let's take Peloton for a spin first.
Peloton exploded as the high-end fitness platform at home. Its treadmills became the worthy substitute to fitness center workouts. Its even more popular stationary bikes replaced local spinning class boutiques.
Growth has been tremendous. Peloton connected fitness subscribers have soared 134% to 1.67 million members. Its cheaper digital subscriptions for folks that lack Peloton hardware is a much smaller business, but it's growing even faster. Peloton's now topping $1 billion in revenue every quarter, and it's not done working up a sweat.
Peloton isn't going anywhere once the public health crisis abates, largely because this was one pandemic play that legitimately improved on the original it was replacing. Peloton's interactive sessions are convenient and productive. The proof is in the pudding. Investors may have rotated out of Peloton shares; the stock is 31% off of January's peak. But workout seekers see things differently. Demand continues to outstrip supply even with vaccines on the market. The order backlog is still several weeks for new orders.
2. Zoom
Tuesday was -- well -- weird for Zoom stock. The videoconferencing speedster opened 7% higher after serving up a monster quarter, only to shed 15% of its value throughout the trading day to close Tuesday out with a 9% decline.
Results for its fiscal fourth quarter were stellar. Revenue skyrocketed 369% to hit $882.5 million. If you think that's a big number, adjusted operating income and earnings per share soared 840% and 713%, respectively.
Growth will undeniably decelerate at this point. Zoom issued guidance for the new fiscal 2022 year, and it sees revenue climbing 42% to $3.77 billion, with adjusted earnings rising a modest 8% to $3.62 a share. If Zoom's guidance sounds like a good reason to dump the stock, keep in mind that before the report analysts were expecting Zoom to earn less than $3 a share in the new fiscal year. It's not going away post-pandemic. Zoom is part of our lives now, and the stock's a bargain at a 37% discount to its October high-water mark.
3. Tesla
Investors are allowed to change their minds -- and their wheels. In January, I singled Tesla out as a stock to avoid. A month later, I finally owned my first Tesla vehicle and became a shareholder for the first time.
"Tesla isn't going to relinquish its pole position in the ascending electric vehicle market," I argued in late January. "It will keep making its mark, and the revolution is real. The $837 billion market cap is what worries me here."
Tesla's market cap had peaked at $864 million two days earlier when its shares briefly topped the $900 mark. The stock is trading 24% lower as of Tuesday's close.
Legacy automakers are making big moves in going electric, and there are potential new entrants in this niche that bear watching. The problem for them is that they're not Tesla. They lack the full self-driving tech where a car can literally drive itself from a freeway onramp to the desired exit. They lack the proprietary network of more than 20,000 Supercharger stations to eat away at range anxiety.
Tesla turned profitable in 2020 and posted a 6.3% operating margin. It produced and delivered a half million cars. The more economical Model 3 and Model Y are driving the surge in volume, but earlier this year Tesla updated its higher-end cars. Some might still not consider Tesla a bargain with its $659 billion market cap, but momentum is on its side.
Peloton, Zoom, and Tesla are down, but they're not out. All three stocks should bounce back in March and beyond.
