Friday's Market Minute: Watch For Bull Traps Ahead

While many stocks and sectors plummet, investors have turned their attention towards stay-at-home names, driving up the share prices of companies that might not deserve the valuations in the longer run. Since no one knows how long the initial quarantine will last, or if there will be a second wave of the virus that sends us into lockdown again, it is hard to predict how long the benefits to these companies will last. However, investors should consider what level of demand will stick around, and what percent might evaporate.

A company like Peloton Interactive, Inc. PTON, which requires a significant initial purchase (at least $2,000) and leaves the consumer with an actual piece of hardware, may have less trouble than a company like Blue Apron Holdings, Inc. APRN or Zoom Video Communications, Inc. ZM, subscription services that can more easily be cancelled. Zoom is also contending with privacy issues and has many non-paying users, and Blue Apron shares hit a low of $2.01 on March 9th of this year, struggling with both demand and competition.