Even as the wider stock market plunged into bear market territory this week, it was clear that not all equities are created equal. The coronavirus outbreak which causes the disease COVID-19 has helped to highlight a number of businesses that may not be hurt (or hurt as much) by this pandemic, but may ultimately reap a financial windfall related to the outbreak.
With that in mind, I went shopping in recent days and added three such stocks to my portfolio: Zoom Video Communications (NASDAQ:ZM), Teladoc Health (NYSE:TDOC), and Roku (NASDAQ:ROKU). Let's take a look at each business and why I decided now was the time to add -- even though the market may still have further to fall.
1. Zoom Video: A work-from-home enabler
One of the biggest developments over the past couple of weeks has been the trend of companies asking their employees to stay home. Many of the biggest names in technology advised personnel last week -- particularly those in areas hardest hit by the outbreak -- to work from home, if at all possible.
Zoom Video Communications is positioned to be one of the biggest beneficiaries of that trend. Just last week, the company reported revenue that grew 78% year over year, while its customer count grew 61% in the fourth quarter. Even more impressive, the number of customers contributing revenue of more than $100,000 over the trailing-12-month period grew even faster, up 86% compared to the prior-year period. It's important to note that its quarter ended Jan. 31, 2020, even before the coronavirus epidemic accelerated across the globe.
The outbreak has pushed video conferencing into the spotlight and, as founder and CEO Eric Yuan said on the Q4 conference call, "Over the night, almost everyone really [understood] they needed a tool like this."
Zoom expects its stellar growth to continue. In the first quarter, the company is forecasting revenue growth of 64% year over year, and non-GAAP net income to nearly triple. Given its history of conservative guidance, the results could be even better.
2. Teladoc: The doctor's visit of the future
As the outbreak of COVID-19 coronavirus accelerated, health officials -- including the U.S. Centers for Disease Control (CDC) -- advocated the use of telemedicine and virtual health platforms to help minimize the spread of the virus.
Teladoc does just that, providing a telemedicine platform that lets doctors connect with their patients remotely. Business was booming even before the health crisis, but recent events have shined a spotlight on the virtual healthcare provider. Paid memberships in the U.S. climbed 61% year over year in the fourth quarter, while fee-only patients soared 104%. This helped drive subscription revenue up 24% year over year, while revenue from paid visits grew by 47%.
The future could hold even more upside. For the first quarter, Teladoc is guiding for revenue to increase by about 32% year over year. U.S. subscribers are forecast to grow by nearly 52%, while fee-only visits are expected to soar 88%. It's also important to note on the Q4 conference call, CFO Mala Murthy noted, "We have not included the impact of that [coronavirus] in our forward-looking guidance," so there could be additional tailwinds.
3. Roku: Streaming video while holed up at home
It's no secret that I believe streaming pioneer Roku has a long runway for growth and plenty of compelling reasons to buy the stock. Yet as more and more people huddle indoors and avoid crowds and public gatherings, streaming becomes an indispensable gateway to entertainment, and Roku is perfectly positioned to fulfill that need.
Roku was one of the top stock performers last year, gaining 337% on the strength of the company's rapid growth. Revenue grew 49% year over year in the fourth quarter, but that only tells part of the story. Roku makes the majority of its money from advertising across the channels that appear on its platform. That segment, which includes advertising, The Roku Channel, and its smart-TV operating system (OS), soared 71% year over year, driving the majority of the growth, and now accounts for 63% of Roku's total revenue.
Additionally, its other metrics are equally compelling. Active accounts grew 36% year over year while streaming hours grew 60%. The average revenue per user (ARPU) is also climbing, up 29% compared to the prior-year quarter, while monetized video advertising impressions more than doubled year over year.
Since Roku hosts both paid and ad-supported channels on its streaming technology platform, it has the most to gain from the trend toward streaming -- and even more as the coronavirus outbreak drags on.