Although it is still too early to tell when the pandemic will end, there is hope with multiple vaccines available that the day will come sooner rather than later. For investors, now may be a great opportunity to start looking at businesses that have been struggling because of COVID-19 and that could be much better buys once things are back to normal.
Two such businesses to consider right now are Intuitive Surgical (ISRG -0.37%) and Walt Disney (DIS 0.84%). Even though they have increased in value over the past year, there is potential for these stocks to soar even higher in value once the pandemic is no longer weighing down their businesses, and here's why.
1. Intuitive Surgical
Over the past 12 months, Intuitive Surgical stock has risen 57% in value, slightly outperforming the S&P 500's 53% gain over that time frame. It is a bit surprising how well the stock has done, given that the pandemic has caused hospitals to put off surgical procedures -- meaning less demand for Intuitive's da Vinci surgical systems -- as they focus on containing COVID-19.
And the uncertainty with the pandemic is why Intuitive isn't able to project how much of an effect it will have on its business. The company last reported its earnings on Jan. 21, where for the fourth quarter ending Dec. 31, 2020, its sales of $1.3 billion grew by a modest 4% year over year. Although the number of da Vinci procedures was up 6% during the period, device shipments were down 3% from last year.
To put that in perspective, consider that in Q4 2019, Intuitive's sales rose by 22%, while both procedures and shipments were up -- 19% and 16%, respectively.
If Intuitive can get back to those types of numbers once the pandemic is over, the stock may continue delivering strong returns for its investors. And that is why buying shares of the company now, before that happens, may be a great move. What makes it an even better buy for the long term is that the business is in a high-growth industry and already posting strong profits. In four of the past five quarters, the company's profit margin has been 27% or better.
Assuming the company can maintain those types of margins, its profits could go through the roof. Analysts project that the robot-assisted surgical systems market will be worth nearly $18 billion by 2027, growing at a compounded annual growth rate of 14.8% until then. Intuitive looks to be a great healthcare investment that you can hang on to for many years.
2. Walt Disney
Any travel-dependent business is feeling the effects of COVID-19, and Walt Disney is no exception. Its popular theme parks thrive on visitors, and while the company has been growing its video streaming business, that hasn't been enough to offset declines in other areas of its operations.
On Feb. 11, Walt Disney released its first-quarter earnings. Sales of $16.2 billion for the period ending Jan. 2 were down 22% year over year. Revenue from parks, experiences, and products declined by a whopping 53%, and that part of its business incurred an operating loss of $119 million (versus a profit of $2.5 billion a year ago). Its media and entertainment segment, which includes its movies, was down a more modest 5%, as it wasn't immune to the pandemic either.
Walt Disney reported a narrow profit of $17 million in Q4, which was an improvement from the two previous periods where it was in the red, but it was still nowhere near the $2.1 billion net income it reported in the previous year.
Despite these challenges, investors have still been buying up shares of Walt Disney as the stock has doubled in value over the past year. The strong results surrounding its streaming business, Disney+, are likely a key reason for that. It has more than 100 million subscribers, which is already half of Netflix's tally -- and Disney+ has only been around since November 2019.
Once visitors are back in its theme parks and things get back to normal, Disney will benefit from what made it a great investment before the pandemic plus its growing streaming business. Pent-up demand for any kind of entertainment or travel could potentially send its sales numbers to record levels. And that is why, despite its already terrific gains over the past year, it still may not be too late to invest in the company.