Company / Analytics

Analytics, 08 April 2020

Did any stocks gain during the COVID-19 pandemic?

Financial markets continue to react to fears that the fast-spreading COVID-19 could produce a global economic shock. The reactions have so far caused stock sell-offs in markets across the world. But some stocks have seen gains during this season. These are stocks of companies that are somehow correlated with coronavirus, technology companies and healthcare companies’ stocks. We profiled some of these stocks.

Technology stocks

Zoom Video Communications Inc.: The popular video conferencing company which went public last year is listed on the NASDAQ (as ZM) and has seen a rise in share price with more downloads and engagements as people start working from home. According to Market Watch, Zoom Video shares climbed 6.2% on Thursday last week, putting the videoconferencing company on pace for an 11.6% weekly gain and a 67% return in the year to date. Before its IPO last year, the company had a $1 billion valuation. Since the start of the coronavirus outbreak, Zoom has seen its market value increase exponentially, reaching $42 billion (£34.2 billion) by 31 March. Between the beginning of February, when the virus was only beginning to go global, and 23 March, Zoom’s share price more than doubled from $76.30 to a peak of $159.56 (Source).

Zoom currently enjoys one of the largest market shares within video conferencing technology stocks, and as the trend towards remote working gains pace, it’s worth considering its longer-term future growth prospects. For instance, there is little sign of the remote working arrangements necessitated by COVID-19 being eased any time soon. (Note: there has been a confusion between Zoom Video Communications Inc. – highlighted here – and Zoom Technologies (ZOOM)). We refer to Zoom Video Communications. Zoom Technologies has been out of business for years, and the Securities and Exchange Commission (SEC) has temporarily suspended trading in Zoom Technologies due to the confusion).

Slack. is another popular collaboration software company that could thrive as more people work from home. While the company has failed recently – its shares plunged after it posted its fourth-quarter results in March - it’s still a favourite for many businesses who use it as an office collaboration platform.

Slack’s latest fourth-quarter results show that the company experienced growth in all the right places. The total number of paid customers rose 25% annually to 110,000. Of those customers, 893 spent more than $100,000 annually, up 55% from 645 last year, and those larger customers accounted for 47% of its fourth-quarter revenue - up from 41% a year earlier. On the other hand, revenue rose 49% annually to $181.9 million, beating estimates by nearly $8 million but marking its slowest growth rate since its public debut last June, according to an analysis of the company by The Motley Fool.

The company recently announced a $600 million debt offering due in 2025, convertible into cash, stock, or a combination of both depending on the holder’s preference. Slack still has room to grow and investors can consider this stock after examining its books, and future prospects. Here is a good place to start.

Other technology stocks to monitor include DocuSign, Logitech, and Microsoft due to Microsoft Teams which offers remote-working tools.

Healthcare Stocks

Several stocks for companies focused on diagnosing, treating, and preventing the coronavirus disease COVID-19 have also seen their stocks soar.

Vir Biotechnology operates as a clinical-stage immunology company. The Company develops and commercializes therapeutics and medicines for the treatments and preventions for viral and bacterial diseases. The stock rose 18% on Monday mid-day trading after it announced a partnership with GlaxoSmithKline to research and develop solutions for coronaviruses, including COVID-19. As part of the collaboration, GlaxoSmithKline will make a $250 million investment in Vir while the team said promising antibody candidates for the COVID-19 will be accelerated into Phase II trials within the next three to five months.

Other health-related companies to monitor include GenMark Diagnostics, Alpha Pro Tech and BioCryst Pharmaceuticals which have seen their share prices rise at some point due to their engagement in the diagnosis, testing, and treatment of COVID-19.

As with work-from-home technology stocks highlighted above, there is no question that the coronavirus will boost the demand for products from some healthcare companies such as those mentioned above. Already we are seeing a surge in demand for products developed by these companies – test kits, diagnosis kits, and masks among others – which remain in short supply.

There is heightened investor attention on some of these companies, for example, Alpha Pro Tech, which has ramped up production of its face masks that protect against viral infection. However, due to limited data on these stocks, we can’t tell for sure whether the gains from these stocks are fully warranted and their longer-term sustainability of these companies.

The shrewd thing to do with healthcare stocks is to focus on their overall business prospects instead of only on their potential related to the coronavirus.

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