It’s been an exciting start to the year for the Nasdaq Composite (COMPQ) thus far, with the index on track for one of its strongest starts out of the gate in history. As we head into the back half of February, the Nasdaq Composite is already up 9% year-to-date, or an annualized return of nearly 70% if this pace continues…
This strong momentum has been driven by solid earnings reports out of names like Netflix (NFLX) and Tesla (TSLA), as well as continued outperformance from Semiconductors. However, in a market where it’s tough to find stocks that aren’t extended short-term, two tech stocks are looking attractive as they build new bases, with high-octane earnings growth and a commanding lead in their industry. For investors looking to add exposure in a market that doesn’t offer any dips, these two names look to be offering a low-risk opportunity.
Peloton (PTON) and Zoom Video (ZM) were two of last year’s largest leaders, enjoying triple-digit returns vs. the S&P-500’s 15% return, with both companies seeing massive demand for their products. This was because consumers looked to find ways to continue exercising at home and to converse with friends & family during the pandemic.
Of course, Zoom Video’s dominant tailwind came from the work-from-home movement, given that most travel and face-to-face meetings out of the picture. Despite these companies continuing to post incredible growth in their most recent quarter, they have not kept up with the market since Q4 and have spent the past quarter building new multi-month bases. Generally, when market leaders take a break and relieve their overbought conditions, this is an excellent opportunity to look at starting a new position. Of course, this view is emboldened by the fact that both companies just put up incredible earnings. Let’s take a closer look below:
(Source: Company Earnings Slides)
Beginning with Peloton, the company just came off a massive quarter, with Connected Fitness Subscriptions up 134% year-over-year to 1.67MM, and paid Digital Subscriptions up 472% to 625,000. For nay-sayers suggesting that there was no hope in consumers paying a $30~/month fee to exercise at home, this report certainly squashed any of these doubts. Based on strong growth in subscriptions and minimal churn, the company reported revenue of $1.06~BB in fiscal Q2 2021 alone and has guided for $4.1BB in revenue in FY2021.
This exceptional growth despite vaccine roll-outs suggests that many fitness enthusiasts are sticking with their Pelotons, and many are looking to join the workout-from-home movement with no interest in going back to crowded gyms. Therefore, while the global pandemic was clearly a massive tailwind for Peloton in FY2020, it’s looking like the pandemic’s length relative to expectations will create more long-term Peloton users than initially anticipated.
However, the most bullish takeaway from the report was that…
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