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3 Stocks Immune to the Coronavirus

By Will Healy – May 16, 2020 at 11:15AM

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These companies benefit as people and businesses are in lockdown.

We all know that the coronavirus, as well as the lockdowns associated with its spread, wreaked havoc on both stocks and the overall market. At the peak of the stock decline in February and March, the S&P 500 lost almost 35% of its value within a few weeks. Though the market has regained much of that lost value, the index has still fallen by more than 15% from its 2020 high. 

However, some sectors of the economy and the stocks associated with them were not only immune to the worst of the virus's effects but actually prospered. (AMZN -3.01%), Netflix (NFLX -4.49%), and Teladoc Health (TDOC -3.54%) are three of these coronavirus stocks. Let's learn a bit more about them and how they managed to outperform.

An illustration showing a stick figure holding a shield as he is bombarded with coronavirus cells

Image source: Getty Images

1. Amazon

Amazon benefits from the coronavirus pandemic both as a consumer staple stock and as a tech stock. On the retail side, one can make a good argument for Costco and Walmart as coronavirus stocks. However, since Amazon's e-commerce focus allows consumers to shop while in lockdown, it maintains an advantage on the retail end.

It holds an additional edge because of its Amazon Web Services (AWS). This service provides cloud capabilities that allow people to connect with the rest of the world for work and social purposes.

Like most stocks, Amazon shares were initially sold off in mid-February. However, as investors began to realize its potential, Amazon stock recovered its losses by mid-April, and now trades near record highs. It has increased in value by just over 24% since the beginning of 2020.

AMZN Chart

AMZN data by YCharts

Net sales increased by 26% in the previous quarter. Still, its net income continues to fall as it transitions from two-day to one-day service for Prime members. With a forward P/E ratio that has now risen above 95, its apparent immunity to COVID-19 is a known quantity.

Yet while Amazon stock seems immune, the company's operations are not. Amazon's guidance makes a quarterly profit just as likely as a loss, even as management expects revenue to increase by somewhere between 18% and 28%. However, as those who cannot leave home or go to work continue to use the company's cloud and e-commerce services, the overall trend for the stock should be positive.

2. Netflix

The current crisis seems to have played into the hands of streaming giant Netflix. The lockdowns left millions of people without employment and with little to do. Hence, they have more time for streaming media. At $12.99 per month for its standard plan, Netflix has become an affordable distraction for families looking to get their minds off of the pandemic and still manage to keep spending under control.

Although investors initially sold the stock, it bounced back quickly. By mid-April, the stock price surpassed its February peak and established new all-time highs. Netflix stock has risen by more than 30% since the beginning of the year.

NFLX Chart

NFLX data by YCharts

This likely contributed to the 27.6% year-over-year revenue growth the company saw in the first quarter. Net income also rose by 106.6% as the company reported $1.57 per share in earnings.

Also, COVID-19 forced the company to halt production in most of the world. With the company spending less to create content, Netflix investors are seeing something they rarely see: positive free cash flow of $162 million.

With a forward P/E ratio of approximately 68.5, Netflix stock is not cheap. Still, as lockdowns continue, investors should expect consumers to retain the Netflix service. The company forecasts revenue of $6.05 billion in the second quarter, a 22.8% increase. Also, if the prediction of $1.81 per share in profits comes to pass, it would more than triple the $0.60 per share earned in the second quarter of 2019.

In time, business conditions should begin to return to pre-COVID-19 levels. Still, as long as the company can attract increased viewership, Netflix stock should continue to deliver returns over the long haul.

3. Teladoc Health

Perhaps no stock is better positioned for a pandemic than Teladoc Health. As a leading provider of telehealth services, the company provides a key benefit. It allows patients to see doctors virtually. Thus, patients can receive treatment without having to leave their homes or sit in a waiting room with other sick patients.

As the S&P 500 went into freefall in mid-February, investors saw the potential of Teladoc and bid the stock steadily higher. This has helped the stock rise by more than 120% since the beginning of the year.

TDOC Chart

TDOC data by YCharts

Although the number of coronavirus cases did not begin to grow significantly until the last weeks of the quarter, the company saw a massive revenue surge. Overall revenue increased by 41% to $180.8 million. This also accounts for visit fees, which rose by 93% year-over-year.

The profit picture showed a slight improvement. However, the company still lost $0.40 per share in the prior quarter. Also, at a price-to-sales (P/S) ratio of 22, the stock price may have moved ahead of growth.

Still, analysts expect earnings to grow by an average of 20% per year over the next five years. Moreover, as consumers become increasingly comfortable with telehealth, more patients may choose to talk to a practitioner from Teladoc before deciding if they need an in-person office visit. This trend toward more telemedicine should help make Teladoc stock a long-term winner.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Netflix, and Teladoc Health. The Motley Fool recommends Costco Wholesale and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$226.41 (-4.49%) $-10.64, Inc. Stock Quote, Inc.
$113.78 (-3.01%) $-3.53
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$26.97 (-3.54%) $0.99

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