Nasdaq's Midday Slump: Tech Stocks Lead the Way Down

If you had to pin down what made for big losers in midday trading on Wednesday, it would be the surprising decline of businesses that were expected to lead the market higher. The companies that performed the worst were, typically, those you would have thought would have been the best, the ones that year over year would continue to grow as compares got tougher. But that would both be a misperception -- these aren't just tech stocks -- and an understating of management's ability to take advantage of the moment and expand beyond whatever thought possible. Put simply, these companies were counted on too much in the post-pandemic environment and the buyers are experiencing some real regret.

The first stock, down a shocking 7%, was the classic thought-to-be-a-winner story, Tesla (TSLA). Here's a company that was thought would reach peak sales in 2021 -- makes sense given the trajectory we have experienced since the pandemic began. But because of production issues, regulatory challenges, and market sentiment, Tesla's should have a much worse 2024 than most thought. Until recently, analysts were predicting $100 billion in revenues in 2024, but the 2024 number's been on the decrease as the company struggles to meet production targets and maintain its market share. The stock of Tesla is perennially expensive -- it's at 120 times earnings right now -- and then it justifies the multiple with fantastic results. Another 7% drop might be hard to repeat, but I think that the company will still surprise in the second half.

Nvidia's (NVDA) stock, down 6.5%, has already been chronicled in my earlier piece. The company's data center sales soared 154% in the most recent quarter to $26.3 billion, but the stock's decline indicated that investors were concerned about the sustainability of this growth or the potential for increased competition in the AI chip market.

The next stock after that, though, DocuSign (DOCU), is a perfect example of what you would least expect to be down 3.5% after the reopening has taken hold. People often link DocuSign to Zoom (ZM), two products we will never retreat from post-Covid. The first, though, is gaining speed and offering new categories, like the agreement cloud, which is more of a platform meets service silo than a simple e-signature business. Plus, the near-term introduction of a notary replacement -- talk about vestigial -- and expansion almost totally unexploited internationally. Zoom, on the other hand, while ingrained and loved, has competition and could see its speed of growth tapered because of a return to international business travel. I think Zoom's too cheap, but I truly like DocuSign given that it's become as generic as a Zoom call but has fewer competitors. As CEO Dan Springer always reminds you, once people have tried DocuSign "they don't go back."

We all knew the stories of how companion animals took off during Covid. Dogs were everybody's best friend. The trend couldn't come at a better time for Idexx Labs (IDXX), where there had been a growing concern that the humanization of pets theory had begun to play out. Now, though, new pets have come into a world at a time when the educated pet owner knows you have to go to the vet more than once in a couple of years' time. And when you do, your pet is more than likely to deal with diagnostics from Idexx.


There's been no real cessation of pet adoption with the pandemic slowing down. Plus, pet owners who have one pet are increasingly taking on a second. The pet adoption agencies are more and more scrutinizing of owners and are testing the pets under their care for all sorts of illnesses, including a fecal test that is from Idexx. Plus, people may not realize it, but Idexx, which had been doing much better in companion than in livestock, has a robust African Swine Fever testing business in China. The stock of Idexx is perennially expensive -- it's at 80 times earnings right now -- and then it justifies the multiple with fantastic results. Another 29% rally might be hard to repeat, but I think that the company will still surprise in the second half.

Intuit (INTU) is either the luckiest company or the smartest. I can't even tell. Maybe both. Intuit's got a fantastic small and medium-sized business, QuickBooks, which looked like a goner when that cohort looked doomed. But then PPP gave it new life. It paid $8.1 billion for Credit Karma back in 2020, which looked like way too much. Instead, 40% of Credit Karma's new customers come from Intuit's base. In return for spending habits, Credit Karma gives you free credit scores. People are addicted to getting their scores. The score keepers are happy to give away the info in order to offer targeted ads in an incredibly virtuous circle. But my favorite part of the story is TurboTax. Can you imagine how many people who might have gone to an H&R Block (HRB) office turned to TurboTax's video offering? Game set match. Like DocuSign, I don't think you ever go back to the old way, and the old way is its faltering competitor.

Finally, I am sure you might be thinking there has to be at least one more reopening story among the losers. Perhaps Intuitive Surgical (ISRG) seems like one, where people might have held off elective surgery until the pandemic subsided? I think the stock of Intuitive Surgical fell 2.5% last quarter because it has a gigantic replacement cycle and it is still not as penetrated as it should be given that it's got so many more uses than ever thought possible when its Da Vinci machine was first rolled out: cardio, colorectal, head and neck needs, thoracic, gynecological, and, of course, prostate illnesses. This is a remarkable company because it offers a lower cost to treat, along with a better patient experience, better surgical experience, and better outcomes. Why isn't the darned thing mandated?

I know there are people who believe that its time has come because Medtronic (MDT) has a strong competitor. But people have written this company off like that for ages. I would stick with Intuitive. In fact, of all of these losers, I expect it to do the best in the second half.

It's always tough to repeat. But it's not as tough if you have brilliant people at the helm. In every case of these top five, it's a given. I'd buy ISRG now; I'd buy all but Tesla on weakness, the latter's just too hard for me to figure out, at least at these levels.