Coronavirus Stock Market Prioritizes Online Sector
Well, it’s safe to say that I called this one incorrectly. A few weeks ago, I thought that the novel coronavirus (COVID-19) would come and go, being no more harmful than SARS or the swine flu before it.
It appears I was wrong. Around the world, countries are headed into lockdown and “social distancing” is quickly becoming the phrase of 2020. The stock market, meanwhile, is taking hit after hit.
But even in these tumultuous times, I have been right about some stocks faring better than others in this crisis.
And that brings us to Amazon.com, Inc (NASDAQ:AMZN), Walmart Inc (NYSE:WMT), and Netflix Inc (NASDAQ:NFLX).
Both Walmart stock and Amazon stock have had rough rides so far during the market crash, but they have also seen spikes at times. Amazon stock, for instance, at one point actually gained over the previous month, making it an outlier.
But the losses that these two stocks experienced can primarily be attributed to the overall market panic. In the wake of the coronavirus outbreak, both Walmart and Amazon are perfectly situated to see an increase in business, not a fall.
That’s because both companies offer necessary goods (everything from food to toilet paper) that are only going to keep flying off shelves at an alarming rate as states of emergency are declared in country after country.
While sales of “luxury” goods like televisions and video games may see declines, that’s not likely the case with food and other day-to-day supplies.
So you have two companies that aren’t only coronavirus-proof, but are likely to see an uptick in sales as a result of the virus.
Furthermore, both companies have a very strong online presence.
In the case of Amazon.com, you have the largest online retailer the world has ever seen. One could argue that Amazon single-handedly created the online retail space—or at the very least, popularized it.
Walmart has also upped its game as far as e-commerce goes. In fact, Walmart stock has fared well over the past few years in no small part due to its efficacy when it came to warding off attacks from the online realm. Which is to say that WMT stock has thrived in part due to the company’s impressive adaptation to online sales.
Walmart Inc is hoping to improve upon its already impressive online retail presence with its newest program, “Walmart+.”
It’s designed as a rebrand of Walmart’s already-existing “Delivery Unlimited” service, which acts similar to “Amazon Prime,” offering unlimited free shipping for a membership fee of $98.00 a year. (Source: “Walmart Is Quietly Working on an Amazon Prime Competitor Called Walmart+,” recode, February 27, 2020.)
This includes same-day shipping of groceries, something that could prove very useful during the current pandemic.
Walmart is also considering including a feature that would allow Walmart+ customers to use text messaging to place orders.
Walmart+ was reportedly set to launch as soon as March, but with the coronavirus making a mess of everyone’s plans, I anticipate it will be pushed back.
Conversely, were Walmart to go ahead with this rollout despite the disease pandemic, that would make perfect sense. After all, people would love to have their groceries delivered to their door right now. Walmart stock, as a result, is in the enviable position of being one of the few stocks poised to actually benefit from the current crisis.
The company also plans to eventually offer other benefits to Walmart+ users, such as discounts on gas and prescription drugs. It also plans to introduce what it calls “Scan and Go” service, which would allow shoppers to check out at brick-and-mortar Walmart stores without waiting in line.
While this will by no means rival Amazon Prime (yet), both Walmart and Amazon are offering solid online alternatives to shopping in person, a huge benefit with the coronavirus around.
Since both companies sell goods that are necessary, they will likely not see a dip in sales revenue due to the coronavirus. Furthermore, both companies have delivery systems that would help people feel at ease, as they won’t have to travel outdoors and be in crowds. That’s a win-win during the current situation.
Aside from the two companies’ strong positioning due to their products and services, there’s another big reason they are better suited than other businesses to not only withstand the storm, but actually thrive from it: their size.
Both WMT stock and AMZN stock are pricey in that they have market caps to the order of hundreds of billions of dollars (about $350.0 billion and $950.0 billion, respectively). This means the two companies have incredible staying power and can easily outlast whatever market fall comes.
As such, Walmart stock and Amazon stock appear to be two of the strongest “coronavirus stocks.”
Herein lies a lesson for investors in these volatile times: look for big, strong, online companies.
The Best Coronavirus Stocks
What AMZN stock and WMT stock are giving us is a port in a storm.
While everything—even traditional safe-haven investments like gold—is down, we can be confident that this is a temporary slowdown. A market recovery is on the way, of that there is no doubt. That’s because COVID-19 will not end the world.
At the same time, it will change a good many things about our lives, meaning that certain companies that are more adaptable to this new style of life will thrive while others suffer.
The coronavirus panic will likely subside in the coming months, if not sooner, but the new reality we’ll be inhabiting for the next while is going to favor a specific type of company.
And that’s a company that’s big and online.
Aside from Amazon and Walmart, we have Netflix, another company with staying power. It offers a service that people are likely to use more, not less, during the COVID-19 crisis.
I’ve written several times that video streaming and online workplace tools are going to see huge gains in the coming months as the world tries its best to adapt to the coronavirus.
Meanwhile, with millions of people staying home for the next little while (think service industry workers and the like), Netflix stock will see a boon as more people make use of the company’s service.
What we’re seeing then is not the end of gains in the stock market but instead a reframing, a different mindset as the market is shaped by COVID-19.
We live in interesting times and the future is uncertain. That’s not particularly good for the stock market, but, as in most cases, the ups and downs of this wild market actually provide ample opportunities for profits. You just have to know where to look.
In this case, companies operating in the online space are uniquely situated to see big gains as a result of the viral outbreak. Furthermore, companies that are well established and have a lot of cash are more likely than others to weather the economic blow brought on by COVID-19.
The companies that fit all these criteria—including Amazon.com, Inc, Walmart Inc, and Netflix Inc—are legacy companies that are worth hundreds of billions of dollars. So while they may see a dip in share price in the short term, I have little doubt they will recover.
In a way, the coronavirus could actually be one of the better things to happen to the stock market in a while (if investors are not averse to volatility), with the potential to result in massive spikes in share value in the next year.