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 +0.00%), is a bet on the fast-growing mobile-gaming industry; the other two, DocuSign (DOCU +1.23%) and Zoom Video Communications (ZM 1.11%), are investments in the work-from-home revolution. All three stocks are poised to beat the market amid the coronavirus pandemic.
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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.
