March's trading is off to a volatile start following the substantial sell-off that took place at the end of February. The novel coronavirus officially known as SARS-CoV-2 continues to dominate headlines and cast uncertainty over the global economic outlook. The situation's progression will likely play a significant role in the market's performance this year.
Investors looking for companies that could see substantial stock movement in relation to novel coronavirus news this month or be bellwethers for industry and broader market performance should pay special attention to Gilead Sciences (NASDAQ:GILD), Microsoft (NASDAQ:MSFT), and Walmart (NYSE:WMT). Let's take a closer look at these companies and why they are ones to watch this month.
1. Gilead Sciences
While the S&P 500 index dipped roughly 6% from the start of February through March 5, Gilead Sciences stock has climbed 20.5% across the same stretch. The biotech company has defied the coronavirus-related sell-offs because one of its existing drugs is being tested as a potential treatment for the COVID-19 respiratory disease that stems from the infection.
Remdesivir, a drug that was previously tested as a potential treatment for Ebola, is now being tested for use in combating COVID-19 and is currently the most effective potential treatment known to World Health Organization officials. Investors have piled into Gilead stock with the anticipation that the company's business could see a significant boost from coronavirus-related treatments, but investors may want to manage their expectations.
RBC analyst Brian Abrahams has suggested that Gilead's experimental treatment might optimistically have a 50% chance of success. Even so, the analyst recently put an $86 one-year price target on the stock -- suggesting roughly 13% upside based on the company's current share price.
In addition to the company's coronavirus-related treatments, Gilead Sciences also recently announced that it's set to acquire immuno-oncology specialist Forty Seven in a $4.9 billion deal. Between the remdesivir tailwinds that have made the stock a strong performer over the last few weeks and the big acquisition news, Gilead is definitely a company to watch this month.
Despite recent sell-offs related to concerns about the novel coronavirus, Microsoft still has a market capitalization of roughly $1.2 trillion and remains the U.S.'s largest company (as measured by market cap). The software giant's massive size alone makes it an important stock to watch for broader market performance, and its crucial cloud infrastructure services and widely used consumer products make it a key name to watch in the software space and broader U.S. tech sector.
Microsoft stock is still up roughly 5% in 2020 and 48% over the last year, despite February's sell-offs and turbulence for the markets early in March. Taking a longer view, the stock is up 286% over the last five years and has been on an absolute tear thanks to strong growth for its cloud services business and strong performance for its subscription-based consumer software. Investors will be keeping a close eye on how the company holds up amid turbulence for the broader market.
It's too early to tell how potential economic slowdown stemming from the SARS-CoV-2 outbreak might affect demand for Microsoft's software and services, but the tech giant has already made operational shifts, including dropping out of conferences and encouraging employees at its Seattle and San Francisco area offices to work from home if possible. Microsoft's business has been putting up very strong performance and has a promising long-term outlook, but shares also trade at roughly 30 times this year's expected earnings, and market preferences may shift toward less growth-dependent companies if the global economic outlook worsens.
Walmart is the U.S.'s largest brick-and-mortar retail chain, an important bellwether for retail sector performance, and a stock that tends to be relatively resilient during market corrections and periods of economic turbulence. Despite posting weaker-than-expected sales and earnings when it reported fourth-quarter results in February, Walmart stock has held up quite well during the broader market's sell-off. Its share price is now roughly flat over the last month.
Walmart, which has a dividend yield of roughly 1.9%, may be benefiting from reports that shoppers are stocking up on supplies amid novel coronavirus concerns. Investors might also be seeking refuge in defensive stocks, but conflicting data about the viral outbreak and uncertainty about the potential effects suggest that Walmart's resilience could be tested.
Consumer confidence slid to its lowest point in 10 weeks as a result of the SARS-CoV-2 novel coronavirus outbreak, and the retailer's inventory could be affected by a range of production and transportation factors. With many factories in China still shut down and companies around the world taking precautions to help stem the spread of the virus, it's unclear to what extent the company's inventory stock might be disrupted.
The effects of the novel coronavirus domestically and abroad should become more clear as the month progresses, and Walmart stands out as a top stock to keep an eye on as more information emerges and is interpreted by the market.