Along with exacting a devastating human toll in terms of illness and death, the coronavirus pandemic is causing economic destruction. Most companies are hurting because economies around the globe have largely been shut down to help slow the spread of COVID-19.
Some companies, however, are experiencing increased demand for some or all of their products and services because of the crisis. But that alone isn't enough of a good reason to invest in these companies, at least not for the long run. Investors focused on the long term should favor the stocks of companies that seemed poised to get a sustainable boost from the pandemic, or at least have other catalysts for growth.
Following are eight such stocks.
Image source: Getty Images.
8 coronavirus stocks: key stats
|
Company |
Market Cap |
Forward P/E |
Projected Annualized 5-Year EPS Growth* |
YTD 2020 Return |
10-Year Return |
Return During the Great Recession** |
|---|---|---|---|---|---|---|
| Zoom Video Communications (ZM -0.99%) | $44.3 billion | 374 | 32.5% | 133% | N/A | N/A |
| Teladoc Health (TDOC -2.91%) | $14.3 billion | N/A | 20% | 131% | N/A | N/A |
| Amazon.com (AMZN -1.65%) | $1.2 trillion | 83.9 | 32.4% | 30.4% | 1,580% | (13.9%) |
| DocuSign (DOCU 0.10%) |
$19.2 billion |
206 |
25.3% | 41.8% | N/A | N/A |
| Domino's Pizza (DPZ 1.45%) | $14.4 billion | 33.6 | 11.9% | 25.3% | 2,730% | (34.6%) |
| Netflix (NFLX 1.74%) | $187 billion | 66.3 | 35.9% | 31.3% | 2,880% | 70.7% |
| Everbridge (EVBG 0.03%) | $4.1 billion | N/A | 559% | 52.7% | N/A | N/A |
| FTI Consulting (FCN 0.73%) | $5.0 billion | 24.2 | 14% | 21.7% | 224% | (11.9%) |
|
S&P 500 |
--- | -- | (11.7%) | 187% | (35.6%) |
Data sources: Yahoo! Finance and YCharts. Data as of April 24, 2020. P/E = price-to-earnings ratio. EPS = earnings per share. YTD = year to date. *Wall Street's consensus estimate. **Great Recession officially lasted from December 2007 to June 2009.
6 social distancing stocks
The first six companies on the list -- Zoom through Netflix -- are benefiting from the lockdown orders and social distancing measures that were instituted across much of the world, including most U.S. states. Most of these measures aimed at stemming the spread of COVID-19 were put in place in March, following the World Health Organization's (WHO) declaration that the COVID-19 outbreak was now officially a pandemic.
Zoom Video Communications' videoconferencing and other tools are allowing many people who generally work in offices and other settings to more efficiently work from their homes during the pandemic. Moreover, its offerings are enabling people to hold virtual social events ranging from parties to funerals. Its business should get a sustainable boost from the crisis. If companies believe that Zoom's products are increasing the efficiency of their workforces and their bottom lines, they'll continue to use them after the pandemic is over.
Zoom stock's valuation needs a comment. The stock is priced at a sky-high 374 times Wall Street's forward earnings estimate. There is no denying the stock is ultra-pricey and a lot of future growth is already priced in. That said, there is great reason to believe the stock isn't quick as pricey as it seems. Analysts have been consistently significantly underestimating Zoom's earnings power. In three of the four quarters since its initial public offering (IPO) last April, the company has not just beat the consensus earnings estimate, but demolished it.
Teladoc is the leader in telahealth services. Its services are enabling patients to virtually "visit" their healthcare providers. There's much to like at any time about this more efficient mode of obtaining healthcare, but telahealth has been invaluable during the pandemic. Once many people experience the convenience of telehealth, it seems a good bet that they'll be unlikely to go back to in-person healthcare visits unless necessary.
Tech giant Amazon's e-commerce business is booming, driven by a surge in online shopping for essential products that began in March. The pandemic probably provided a big boost to Prime membership since such a membership enables consumers to get free, faster delivery. This bodes well for the long term since Prime members spend much more money than nonmembers on the company's site.
As the leading video-streaming provider, Netflix is benefiting from the pandemic-driven rise in streaming. Many folks are watching more TV and movies since they're now home more often than usual. Moreover, movie theaters across the country and in many other countries are shut, which is another key factor driving demand for streamed content.
DocuSign is a digital document-signing specialist. The company's services enable people to conduct transactions remotely that formerly needed to be done in-person. Its offerings save people and companies time and money and should prove increasingly popular.
Food delivery is more popular than ever since restaurants are temporarily shuttered and it's challenging in many parts of the country to order groceries online. Restaurants could struggle for a long time to win back consumers, many of whom will be wary of being packed in too tightly with other diners. This would be a boon to Domino's and other companies focused on food delivery.
2 crisis management and mitigation stocks
Everbridge's platform provides communications and applications that help businesses and government entities keep people safe and their operations running during critical events. The software-as-a-service (SaaS) company recently launched pandemic-related services.
FTI Consulting is a leading global financial and management consulting firm. It focuses on corporate finance and restructuring, forensic and litigation consulting, economic consulting, technology, and strategic communications. It has a COVID-19 response team that's helping clients assess and mitigate the pandemic's impact on their stakeholders.
Profitability note
Teladoc and Everbridge aren't profitable and they're not expected to be profitable in the next year. That's why their stocks have no forward price-to-earnings ratio in the table. So these stocks are not good fits for investors who only want to invest in companies that are currently profitable or at least on the verge of profitability.
