A potential novel coronavirus vaccine from Pfizer and/or Moderna could bring an end to the pandemic and help get the world back to normal if it is finally approved and successfully administered globally. But the news of a potential vaccine (or vaccines) could spell trouble for certain stocks that have benefited from shelter-in-place orders and lockdowns across the globe.
Even if a potential vaccine turns into reality, there are some companies that could continue to benefit from the opportunity created by the COVID-19 crisis. Twilio (NYSE:TWLO) and NVIDIA (NASDAQ:NVDA) are two such companies whose novel coronavirus-related gains seem sustainable in a post-COVID world. Let's see why.
1. Twilio is riding the wave of a rapidly changing contact center industry
As the novel coronavirus pandemic raged across the globe, governments were forced to issue shelter-in-place orders to break the chain of transmission. This led organizations to shut down their offices, and that included physical call centers where hundreds of employees would sit and attend to customer queries.
But the need to remain in touch with customers was still there, especially considering more people were studying or working from home. Just imagine that your internet connection is not working, and you need to get in touch with a service provider that's thin on customer support resources as people are unable to work from the office. This is where Twilio stepped in.
The cloud communications specialist saw a sharp spike in demand for its solutions, which enable companies to move their contact center operations into the cloud, allowing customer service associates to work remotely using their laptops and an internet connection. Not surprisingly, many corporations turned to Twilio in a bid to remain connected with customers.
However, the pandemic simply accelerated a trend that was already in motion. Twilio was growing at a rapid rate even before the novel coronavirus arrived thanks to the adoption of cloud-based contact centers. The company's revenue shot up 75% in 2019 to $1.13 billion on the back of a fast-swelling customer base, higher spending by existing customers, and the acquisition of SendGrid.
It is on track to clock a 47% increase in revenue in 2020, which is impressive considering that its 2019 numbers were boosted by the SendGrid acquisition. Twilio's growth could accelerate next year, as it has now moved into a new business that complements its existing offerings with the $3.2 billion acquisition of Segment, a customer data platform provider.
More importantly, Twilio's addressable market is anticipated to expand in the wake of the pandemic. A third-party survey of contact centers in the U.S. carried out by ContactBabel reveals that only 14% of customer service agents were working remotely at the end of last year. The number jumped to 71% by the middle of April 2020, leading to a spike in the number of contact centers using the cloud.
The huge cost savings of a cloud-based contact center are likely to encourage organizations to move away from physical call centers. Twilio estimates that more than half of the 15 million contact center seats will be in the cloud by 2025, compared to just 17% before the COVID-19 crisis, indicating that this hot growth stock may still have more upside to offer.
2. NVIDIA has switched into a higher gear
The novel coronavirus pandemic has been a tailwind for NVIDIA in more ways than one. The chipmaker has seen a huge jump in demand for its graphics cards, which are used for various applications, including video gaming and data centers.
Interest in video games has spiked big time in 2020 as people confined to their homes have been looking for ways to keep themselves entertained. NVIDIA's gaming business has benefited from this trend, as the company's latest results indicate. The company's gaming revenue was up 37% year over year in the third quarter of fiscal 2021 to $2.27 billion, accounting for almost 48% of revenue.
But this could be the beginning of a new growth spurt for NVIDIA, as the company recently launched a new generation of graphics cards that bring about big gains in performance at attractive price points. As a result, NVIDIA could be at the beginning of a huge upgrade cycle that could see millions of customers on older graphics cards upgrading to new ones.
So the rapid growth triggered by the novel coronavirus pandemic in NVIDIA's gaming business could be here to stay. However, this is not the only catalyst that NVIDIA could carry into the post-COVID period. Its data center business has also received a shot in the arm from the pandemic. The load on data centers increased by huge margins on account of lockdowns instituted to contain the spread of the disease as more people were studying, working, or streaming video from their homes.
As a result, demand for NVIDIA's graphics cards, which accelerate data center workloads, also increased, as operators had to upgrade capacity and keep downtime to a minimum. Now, investors should note that NVIDIA's data center business was already in great shape before the pandemic arrived thanks to applications such as artificial intelligence. But the novel coronavirus added to the momentum, and it has paved the way for long-term growth as the market for data center accelerators such as graphics cards is reportedly growing at an annual pace of nearly 50%, according to third-party estimates. Graphics cards are estimated to hold the largest share of the data center accelerator market, paving the way for NVIDIA to sustain its data center growth in the future.
The data center business is NVIDIA's second-largest source of revenue, with 40% of the total business. So the company's two primary growth engines seem all set for growth in a post-pandemic world, and remain unaffected by the impact of a potential vaccine -- which is why investors should hold on to this tech stock, as it could deliver more upside.