In the wild throes of shaken markets, opportunity lurks.
Markets and investors alike have been badly shaken by the rapid spread of the coronavirus. Markets have witnessed the Dow and the S&P 500's largest weekly declines since 2008 and a hasty response from the Federal Reserve. While the list of companies that are feeling the negative effects of the virus continues to grow, there are some bright spots in the market. Companies that protect consumers from infection or that are developing vaccines to battle coronavirus stand to benefit in the near term, while the growing number of employees being told to work from home illustrates the potential of companies that enable remote work. Here are several companies in a variety of industries that are poised to profit from the coronavirus.
Moderna (ticker: MRNA)
The best place to start is the pharmaceutical industry, where the battle against coronavirus presents a clear investment opportunity: The company that creates a vaccine for the virus will win big. Shares of Moderna shot up when the company announced it sent samples of its coronavirus vaccine to The National Institute of Allergy and Infectious Diseases, known as NIAID, and that clinical trials of the vaccine could start as early as April. The unprecedented speed of Moderna's vaccine development is a credit to the company's cutting-edge approach to developing medicines using messenger RNA, giving Moderna a quick lead in the vaccine race even though the company has never brought a single drug to market. But that hasn't stopped investors from sending shares of Moderna up about 40% year-to-date, and if the company's vaccine proves viable, its stock will only continue to skyrocket.
Gilead Sciences (GILD)
Shares of Gilead Sciences have jumped 16% year-to-date, thanks in part to the news that its phase-III studies of antiviral remdesivir could be used to combat coronavirus. The fact that Gilead's defense against coronavirus is already in late-stage clinical trials gives it a huge advantage over its competitors, and if the drug proves viable Gilead stands to make incredible profits from countries looking to stockpile remdesivir against future outbreaks. It doesn't hurt that Gilead provides shareholders with a 3.6% dividend yield while they wait for results from clinical trials.
The Clorox Company (CLX)
Reports from around the globe are that people are stocking up on consumer staples in mass quantities. The Clorox Company is an obvious beneficiary of this spending spree. Over a third of the company's product portfolio is cleaning supplies like bleach, and while sales in its cleaning supplies segment were flat last quarter, shareholders can expect a hefty boost next quarter thanks to coronavirus. But Clorox isn't relying on a pandemic to bring in the money -- the company has been engaged in a long-term cost savings initiative that is starting to pay off, with its gross margin increasing 40 basis points year-over-year.
Costco Wholesale (COST)
Another big winner in the consumer goods sector is certainly going to be Costco, as the biggest name in bulk buying caters to consumers looking to stock up. The company reported that February sales were up 12.4% compared with February 2019. Around 3 percentage points of that increase was directly thanks to the coronavirus. In its quarterly earnings release, Costco also reported earnings per share of $2.10, up 4.5% year over year, and a 6% increase in membership fees. And even if customers were to stay home due to quarantine, Costco's e-commerce sales were up a whopping 22.6%. Costco doesn't need any help from coronavirus to produce big returns, but given strong tailwinds and even stronger demand ahead, investors may want to buy shares of Costco in bulk.
Lakeland Industries (LAKE)
While people continue to buy toilet paper, hand sanitizer and bottled water en masse, there are profits to be had by investing in companies that address the anti-coronavirus needs of professionals. For instance, Lakeland Industries, which sells protective clothing like hazmat suits, has seen shares rise nearly 40% year-to-date thanks to coronavirus fears. As a supplier of protective clothing to several hospitals and industrial customers in China, Lakeland is well-positioned to capitalize on the coronavirus and has maximized capacity at all its Asian facilities to meet increased demand. Lakeland enjoyed a 14% increase in sales last quarter and has an impressive gross margin of more than 33%.
Zoom Video Communications (ZM)
As the number of companies telling employees to stay home rather than risk infection at work continues to grow, working from home may be having a moment. Several companies are poised to profit from widespread quarantines. Zoom Video Communications tops the list. Zoom provides video conferencing solutions to companies, and its fourth-quarter results illustrate just how popular its products are; revenue for the quarter increased a whopping 78% year-over-year. The downside to Zoom is high investor expectations, with a forward price-earnings ratio at a mind-boggling 434. But Zoom has enjoyed impressive returns thanks to the coronavirus, as average daily downloads of its products are up about 90% in the last 30 days as of March 4, compared with the prior month.
Zoom may be raking it in, but it's not the only company that enables remote work. RingCentral provides a suite of communications solutions that focuses on using the cloud and has emerged as a rival for Zoom with a new video product on the horizon. RingCentral has been working to expand its offerings since before coronavirus swept the globe, recently striking a deal with Avaya Holdings (AVYA) to partner on improving its cloud communications portfolio. RingCentral's fourth-quarter results included a 34% increase in revenue year-over-year, and subscription revenue jumped 33%, indicating that the company will continue to profit from an increasing number of recurring payments. With a forward P/E of around 240, RingCentral isn't nearly as expensive as Zoom but still presents many of the same investment opportunities should quarantines around the world continue to increase.
Coronavirus stocks set to profit from the mayhem:
-- Moderna (MRNA)
-- Gilead Sciences (GILD)
-- The Clorox Company (CLX)
-- Costco (COST)
-- Lakeland Industries (LAKE)
-- Zoom Video Communications (ZM)
-- RingCentral (RNG)
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