Please ensure Javascript is enabled for purposes of website accessibility

2 Big Tech Stocks That Could Soar on Earnings

By Jeremy Bowman - Apr 15, 2020 at 11:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Even in a dismal economy, these two industry giants could soon touch all-time highs.

Earnings season is just around the corner and Wall Street is jittery.

Though the impact of the coronavirus didn't pick up steam until mid-March, nearly the end of the quarter, the shutdowns that spread across the country have led to a wide range of companies losing sales and reporting significant losses. Discretionary retailers and restaurants have already issued warnings, and manufacturers like Ford are also facing strong headwinds as the carmaker said that vehicle wholesales fell 21% in the first quarter. Meanwhile, energy stocks have taken a beating, with oil prices at historic lows and demand way down.

However, the technology sector has generally performed well during the crisis since being stuck at home means that people are even more reliant on digital tools to help them work from home, be entertained, and have essentials delivered. And though cloud stocks like Zoom Video Communications and Slack Technologies have earned a lot of investor attention, two big-name tech stocks, Netflix (NFLX 2.90%) and Amazon (AMZN 3.15%), could be poised for big gains this earnings season.

The receptionist at Netflix HQ

Image source: Netflix.

A streamer hits its stride

If there was ever a time for Netflix to shine, it could be now. People around the world are cooped up in their homes. Some are out of work and looking for a distraction, while parents, especially those working from home, are desperate to keep their kids entertained.

Netflix has not released any concrete data showing a spike in memberships or viewing, but there is plenty of anecdotal evidence to indicate a jump in the streamer's popularity. Google searches for Netflix in the U.S. have climbed in recent weeks, and in Europe, regulators had asked streamers like Netflix to slow down bandwidth usage as internet infrastructure maxed out.

Additionally, the new true crime documentary Tiger King has become something of a cultural phenomenon, and Netflix's deep catalog of TV and movies is a clear strength at a time when demand for home entertainment, and time available for it, is surging. 

Netflix had forecast subscriber additions of 7 million for the first quarter, but results could easily top that when it reports earnings on April 21. Better yet, the company is likely to remain many of those new subscribers, even if a deep recession hits, as the service is significantly cheaper than a traditional cable package. Meanwhile, satellite TV provider DISH Network just announced that it is cutting staff and reevaluating its business to deal with the coronavirus crisis, a sign that audiences are moving to streamers like Netflix. 

An Amazon Prime paper bag in between a quart of milk and yogurt.

Image source: Amazon.

E-commerce takes over

Arguably, no company is benefiting more from the consumer shifts caused by the coronavirus pandemic more than Amazon. The e-commerce giant already controlled about half of total online sales in the U.S. before that, and with stores across the country closed and many Americans afraid to venture outside because of the virus, Amazon sales have surged. Though it hasn't released any specific financial numbers, it's made some moves that show how much demand for its services has surged.

Nearly a month ago, the company said it was hiring 100,000 workers to meet pandemic-related demand, and just this week, it said it would seek to add another 75,000 jobs. By comparison, Amazon finished 2019 with 798,000 total employees. 

Amazon has also slowed down shipping speed for nonessential items so it can allocate resources to fast shipping of products like food, medicine, and cleaning supplies, and is reportedly delaying its Prime Day shopping holiday. The company also paused its third-party delivery program, which competes with UPS and FedEx, to devote more resources to its core e-commerce business, and will put new food delivery customers on a waiting list as it doesn't currently have capacity to handle them. 

We don't know what kind of sales spike Amazon has seen, but an update from Target gives us a clue. The big-box chain said that March comparable sales through March 25 had jumped more than 20% and that comps in food and beverage soared by more than 50%. Considering that customers are social distancing and avoiding stores, Amazon is likely seeing a similar jump in sales of essentials. It hasn't yet announced an earnings date, but its first-quarter earnings are expected by the end of April.

Where Netflix and Amazon go from here

Both tech stocks have now recouped all of their losses from the recent sell-off, but the stocks could go up from here. Beyond the pandemic, a recession is likely to pressure many of their competitors and accelerate already active shifts to video streaming from traditional Pay TV and to e-commerce from brick-and-mortar retail.

Though we're likely in the middle of the worst economic crisis in memory, both stocks could hit all-time highs following their upcoming earnings reports.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$179.95 (2.90%) $5.08
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$109.56 (3.15%) $3.35
Target Corporation Stock Quote
Target Corporation
TGT
$142.38 (0.81%) $1.15
Ford Motor Company Stock Quote
Ford Motor Company
F
$11.32 (1.71%) $0.19
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$184.99 (1.34%) $2.45
FedEx Corporation Stock Quote
FedEx Corporation
FDX
$223.61 (-1.37%) $-3.10
DISH Network Corporation Stock Quote
DISH Network Corporation
DISH
$18.37 (2.45%) $0.44
Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$110.97 (2.78%) $3.00
Slack Technologies, Inc. Stock Quote
Slack Technologies, Inc.
WORK

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.