Please ensure Javascript is enabled for purposes of website accessibility

3 Coronavirus-Resistant Tech Stocks to Buy in May

By Will Ebiefung - May 6, 2020 at 8:30AM

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

These stocks are set to outperform the market because of their coronavirus-proof business models.

COVID-19 is the worst public health disaster in recent memory. And no country will be spared the impacts of lockdowns, supply chain disruption, and global recession. According to World Bank estimates, the pandemic will shrink global gross domestic product (GDP) by 3% this year. And that forecast is sure to make tech investors think twice about buying stocks right now.

The good news is that some companies are well-suited to this challenging environment, and they are set to grow amid the catastrophe. With that in mind, here are three coronavirus-resistant technology stocks to buy in May.

The first pick, Zynga (ZNGA), is a bet on the fast-growing mobile-gaming industry; the other two, DocuSign (DOCU 2.03%) and Zoom Video Communications (ZM 3.39%), are investments in the work-from-home revolution. All three stocks are poised to beat the market amid the coronavirus pandemic.

A $100 bill with Benjamin Franklin wearing a surgical mask

Image source: Getty Images.

1. Zynga

Mobile gaming has become a popular outlet for many and an obsession for some. And with the coronavirus pandemic forcing millions to stay away from school and work, demand for mobile entertainment to fill new-found free time is poised to soar in the near term. The World Health Organization even recognizes gaming as an effective way to stop the spread of coronavirus through social distancing, and it's working with the gaming industry to promote the pastime.

Zynga stock has outperformed the wider market this year, with shares up 24.8% year to date, compared to a 10.5% decline in the S&P 500. The company looks set to continue beating the market because of its compelling top-line growth and strong intellectual-property assets.

Zynga's total revenue grew 46% in 2019, from $907.2 million to $1.32 billion. Online games make up 79% of total sales, and growth in this segment is driven by popular intellectual properties like Farmville, Words with Friends, and Zynga Poker. Zynga also has a slower-growing advertising business that adds useful diversification to the company.

2. Zoom Video Communications

With the coronavirus pandemic making face-to-face encounters risky, work-from-home companies like Zoom Video have shined in recent months. The videoconferencing application is experiencing a surge in active users as schools and businesses enact social distancing measures. And the rally is set to continue in May because of the company's compelling fundamentals.

Zoom stock has grown 116.2% year to date compared to a 10.5% decline in the S&P 500, which makes it one of the Nasdaq Stock Market's top performers amid the coronavirus pandemic.

Zoom's revenue is growing almost as fast as its stock price. The company's sales soared 88% from $330.5 million to $622.7 million in 2019, and this growth is due to surging active user numbers. While Zoom is a compelling buy amid the coronavirus pandemic, investors should watch out for the competition. Zoom has a small competitive moat, and that means other videoconferencing businesses, like Microsoft Teams and Alphabet's Google Hangouts, could erode its market share.

3. DocuSign

Like Zoom, DocuSign -- which went public in 2018 -- also benefits from the work-from-home revolution, which makes it a great coronavirus-resistant tech stock to buy in May. DocuSign provides electronic signature solutions to public and private enterprises. The company will benefit from the coronavirus pandemic in the short term, and the global megatrend toward automation over the long term.

DocuSign thrives in this climate of social distancing, and the stock has dramatically outperformed the market so far this year. Shares are up by 50.2% year to date, compared to a 10.5% decline in the S&P 500. And this is because of the company's lightning-fast revenue growth and massive potential.

DocuSign grew its revenue by 38.9% in fiscal 2020, from $700.97 million to $973.97 million. But while the company's top line is growing fast, investors should keep an eye on its bottom line. Docusign still isn't profitable, and it generated a net loss of $208.35 million for the period. Management will need to push for profitability in the near term, or issue more shares. The company has $241.2 million in cash and $414.9 in liquid investments on its balance sheet.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), DocuSign, Microsoft, Zoom Video Communications, and Zynga and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and short May 2020 $120 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

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

Zynga Inc. Stock Quote
Zynga Inc.
ZNGA
DocuSign Stock Quote
DocuSign
DOCU
$75.85 (2.03%) $1.51
Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$113.23 (3.39%) $3.71

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

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.