Why Tesla and Peloton Interactive led the Nasdaq lower Wednesday

Highfliers across the stock market took some hits.

| More on:
Tesla stock represented by four tesla electric vehicles parked against mountain backdrop

Image source: Tesla

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

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Nasdaq Composite (INDEX: .IXIC) has led the broader stock market higher for nearly a full year since the coronavirus bear market. On Wednesday, the Nasdaq led the broader market lower, falling almost 1% as of 1:30 p.m. EST even as other stock benchmarks were mixed.

Investors have seen extraordinarily good returns from individual Nasdaq stocks. Two of the biggest standouts have been electric vehicle giant Tesla Inc (NASDAQ: TSLA) and connected fitness equipment manufacturer Peloton Interactive Inc (NASDAQ: PTON), but today, the two high-flying growth stocks were headed lower. Below, we'll take a closer look at what was sending Tesla and Peloton into the red on Wednesday.

Driving lower

Shares of Tesla were down about 2% on Wednesday afternoon, but that reflected a partial recovery from its worst levels of the day. Earlier in the morning, Tesla has been off more than 4% and falling to prices it hadn't seen since the beginning of January.

The move came despite several recent pieces of positive news. Tesla is expected to open a manufacturing facility in India, according to a Tuesday Reuters report, which will open up a huge potential market for the electric-car maker. In addition, ARK Invest CEO and Chief Investment Officer Cathie Wood is continuing to add to positions in her lineup of actively managed exchange-traded funds (ETFs), speculating that Tesla could add a ride-hailing service to its list of aspirations.

Meanwhile, another Elon Musk-led company grabbed headlines on Wednesday. Privately held SpaceX reportedly completed a funding round at just under $420 per share, raising $850 million and establishing a value of $72 billion on the space exploration company. Although some have argued that Tesla could eventually join forces with other Musk-led businesses, others fear that the Tesla CEO could lose focus if he divides his time too much among his various interests.

Even a more extensive decline would still leave Tesla shareholders with plenty of gains over the past year. Nevertheless, with such staunch supporters for the stock, bargain hunters shouldn't count on being able to pick up Tesla stock on the cheap.

Losing the race

Elsewhere, shares of Peloton Interactive were down more than 7%. The move came amid a broader move lower for stay-at-home stocks, driven in part by falling COVID-19 case counts and the possibility of a return to more normal conditions in the coming year.

Yet Wall Street analysts still have hopes that Peloton will remain a successful stock. Analysts at Argus kept their buy recommendation on Peloton, boosting their share price by $40 per share to a new level of $180. As Argus sees it, the stationary bike maker is still seeing unprecedented demand, and even as the vaccine rollout progresses, gyms could still be among the last places that open up fully and return to pre-pandemic conditions.

Today, though, investors seem to be thinking twice about sky-high valuations. Even Argus expects that Peloton will make just 90 cents per share in fiscal 2022. That puts the stock at 150 times forward earnings even after today's drop.

Peloton has had the ride of a lifetime, but some investors want to see what happens down the road. If the fitness equipment company can fulfil orders more effectively and keep capturing rising demand, then its stock could bounce back from Wednesday's setback.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Peloton Interactive and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

A man looking at his laptop and thinking.
International Stock News

Why Alphabet stock was sliding today

Let's take a look.

Read more »

A man looking at his laptop and thinking.
International Stock News

Nvidia's stock was down despite its amazing earnings. Here's what history says is coming next

Although it might seem to defy logic, it's not an uncommon phenomenon.

Read more »

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Nvidia share price slips despite 94% revenue growth

Q3 earnings beat expectations, but what about guidance?

Read more »

high, climbing, record high
International Stock News

Could the S&P 500 Index hit 6,500 by the end of 2025?

Could the index climb higher?

Read more »

a small child holds his chin with his head on the side in a serious thinking pose against a background of graphic question marks and a yellow lightbulb.
International Stock News

Is it too late to buy Nvidia shares?

Is Nvidia stock a buy ahead of its third-quarter earnings report tomorrow?

Read more »

a group of people stand examining a large glowing cystral ball held in the hands of one of the group members while the others regard it with various expressions of wonder, curiousity and scepticism.
International Stock News

Here's what to expect from Nvidia on November 20

Can Nvidia score another win?

Read more »

Two people lazing in deck chairs on a beautiful sandy beach through their hands up in the air.
International Stock News

2 no-brainer Warren Buffett stocks to buy right now

While replicating Buffett's success isn't possible, there are a handful of his investments that are no-brainer buys.

Read more »

A man with a beard and wearing dark sunglasses and a beanie head covering raises a fist in happy celebration as he sits at is computer in a home environment.
International Stock News

3 reasons to buy Nvidia stock before November 20

This week marks a big moment for tech investors as perhaps the most anticipated earnings of the year will be…

Read more »