Be Wary of the Pandemic Software Stock Rally, Especially This One (PTON)

Last week, markets panicked over an emerging Covid-19 vaccine in Africa, dubbed B.1.1.529. Investors rushed back to pandemic software high-flyers.

Tech. investors should avoid jumping back to Teledoc (TDOC), DocuSign (DOCU), Roku (ROKU), and especially Peloton (PTON). The document firms may have bottomed from here as electronic document sharing volumes increase. Nevertheless, PTON and ROKU are potentially at risk of losing their fad.

People are questioning the monthly subscription rates for Peloton bikes. People are sharing more pictures of unused Peloton bikes having clothes stacked on top. The firm will have tremendous headwinds ahead as it ramps up advertising. It may sell inexpensive bikes and lower its subscription rates to spur growth.

Streaming stocks are also losing momentum. Roku is trying to grow its revenue by winning advertisers and selling a monthly ad-free subscription. The former will have trouble competing with the likes of YouTube Premium. Roku will increase ad minutes per content, hurting viewership and advertiser return on investments.

Traditional content suppliers like ViacomCBS and Comcast (CMCSA) are also sharply lower. AT&T’s (T) HBO/Discovery spin-off has zero value to investors. Value investors could buy any of those stocks, while growth investors may start a small position in Roku stock.

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