The COVID-19 pandemic has pummelled stocks across sectors. Companies in the airline, retail, tourism, and hospitality industries have been decimated in the first six months of 2020. Due to countrywide shutdowns, consumer spending has fallen off a cliff. This tepid demand environment had a grave impact on businesses that resulted in a massive spike in the country’s unemployment rates.
However, there are a few companies that have been immune to the dreaded coronavirus. Companies in the technology space have been some of the top-performing stocks amid the COVID-19 carnage. While the S&P 500 and Dow Jones are still trading 3.9% and 9.6% respectively year-to-date, the tech-heavy NASDAQ has gained close to 12% in the first half of 2020.
Here we look at three large-cap stocks that are coronavirus proof and have crushed the broader equity markets.
A collaboration company
Shares of collaboration company Zoom Video (NASDAQ: ZM) have outperformed the equity markets in 2020. As the COVID-19 pandemic kept people at home, the work from home trend accelerated, increasing the demand for Zoom’s collaboration tools and products.
Further, as schools and colleges were shut, educational institutes conducted classes online which further give a boost to Zoom products. Zoom Video stock is up a massive 268% as a result, indicating a market cap of $71.5 billion.
Zoom stock remains a top buy as the work from home trend is here to stay. The remote work culture is just beginning to catch on, which will be a major tailwind for this tech stock. However, Zoom Video is also competing with giants such as Microsoft (NASDAQ: MSFT), Cisco (NASDAQ: CSCO), and Alphabet’s (NASDAQ: GOOG) Google in the collaboration space.
That said, investors and analysts remain bullish given the company’s tremendous growth in a crowded vertical. Zoom Video ‘s daily meeting participants had grown to 300 million in April, up from just 10 million back in December 2019. Its fiscal first-quarter sales rose 169% to $328.71 million, up from just $122 million in the prior-year period.
Zoom Video continues to touch record highs despite its lofty valuation.
A streaming giant
The second stock on the list is streaming heavyweight Netflix (NASDAQ: NFLX). As entertainment options amid the pandemic have been few and far between, Netflix has experienced a significant surge in subscribers.
Similar to other home entertainment services, Netflix saw a temporary rise in viewing, and this accelerated membership growth in Q1. The company’s revenue in Q1 was up 27.6% at $5.76 billion as streaming membership increased by 22.8% to 182.86 million. In the second quarter, Netflix has forecast membership growth at 25.6% while revenue growth is estimated at a healthy 22.8% year-over-year.
Netflix added 15.8 million subscribers in Q1, more than double its estimate of 7 million. Netflix’s management has confirmed that the recent uptick is not sustainable. It expects this growth to decelerate as normalcy returns. Further, the high growth streaming segment has attracted multiple players including Disney+ (NYSE: DIS) and Apple TV+ (NASDAQ: AAPL), in addition to a string of small domestic competitors in international markets.
Netflix stock is up 41% in 2020 and I believe it will be rangebound in the second half of 2020.
A remote work enabler
Similar to Zoom Video, there is another tech stock on our list of coronavirus-proof companies. DocuSign (NASDAQ: DOCU) stock has gained 135% in 2020 and is one stock to watch out for. This company operates in the e-signature space where it has a 70% market share.
In the first quarter, company sales were up by 39% year-over-over-year which was higher than its growth rate of 35% for 2019. The company generated over 95% of sales from subscriptions which makes it a strong bet for the upcoming decade. A subscription-based business model ensures recurring revenue and offsets business cyclicality.
The company has over half a million paying customers including seven of the top 10 global technology companies, 18 of the top 20 global pharma companies, and 10 of the top 15 global financial companies. DocuSign has forecast its total addressable market at $50 billion, providing it enough room to expand sales in the long-term.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
