We have to call a spade a spade: the stock market recently tanked. Between the novel coronavirus (COVID-19) and the subsequent oil price plunge, the markets started the week of March 9 in free fall.
But a couple of companies, namely Netflix Inc (NASDAQ:NFLX) and Peloton Interactive Inc (NASDAQ:PTON) both began trading higher after hours on March 9. So why did Netflix stock and Peloton stock resume gaining? And how can investors profit from the information?
First a little background: as mentioned, March 9 was a bloodbath on the market.
Many stocks saw their values plummet precipitously, with the biggest losers being oil stocks as the price per barrel hit lows we hadn’t seen in a long while because Saudi Arabia reduced crude prices.
The coronavirus, however, was the catalyst for the overall stock market drop, with panic setting in worldwide. Many people are concerned not only about their well-being, but also about what the virus outbreak will do to the economy and stock market.
And that brings us back to the recent poor stock market showing. On March 9, stock prices dropped so dramatically that the “circuit breaker,” a mechanism that stops trading at certain thresholds in order to prevent a total market collapse, was triggered once the S&P 500 index fell by seven percent to start that day’s trading. (Source: “Stock trading temporarily halted as plunge triggers ‘circuit breaker’,” The Hill, March 9, 2020.)
The circuit breaker did its job and prevented a total market collapse, with trading resuming 15 minutes later with less radical shifts. But the damage was already done: many companies saw their share prices plummet in a very short period.
This is all to be expected during a market crisis like the one that the coronavirus has orchestrated.
But then something strange happened: two stocks began trading higher after hours on March 9, namely NFLX stock and PTON stock.
So why did these stocks see gains after the market fall? It’s hard to say for sure, but I have my guesses.
I believe that investors are seeking out stocks that they consider to be coronavirus-proof. In other words, companies that are less susceptible to the outbreak or are likely to see a rise in revenue due to the spreading virus.
Because of the COVID-19 pandemic, people will be looking to limit face-to-face contact in the near future.
And that brings us to Netflix Inc and Peloton Interactive Inc. Netflix is famous for allowing people to spend all day inside, ensconced in thousands of hours of content.
The term “binge watching,” after all, is now mainly used to describe spending inordinate amounts of time on Netflix. I know I’ve done it and I’m willing to bet that you or someone you know has done it as well.
All this is to say that, due to the threat of the coronavirus, more and more people will be watching Netflix instead of braving the outside world—or at least that’s what investors are predicting with the recent uptick in Netflix stock.
Peloton stock is following a similar trajectory. People are more concerned now than ever before about personal fitness. But gyms, as you’d guess, are a hotbed of disease exchange, due to all the free-flowing bodily fluids and shared equipment.
With so many people concerned about contracting the coronavirus, it makes perfect sense that some people would turn towards Peloton—which produces exercise bikes that make the user feel as if they’re in a class—instead of chancing it at the local gym.
While both NFLX stock and PTON stock could see a continued uptick if investors’ first guess proves to be correct and the two companies see an increase in buyers/subscribers, there’s a larger lesson to be learned: “coronavirus stocks” are on the rise.
And by this I don’t necessarily mean stocks specifically related to the disease (although they do include the shares of pharmaceutical companies that are looking to vaccinate or treat the virus).
Instead, coronavirus stocks, as I define the term, are shares of the companies that are most likely to see growth as a result of the spread of the disease.
That includes companies like Peloton Interactive Inc and Netflix Inc, which are likely to see revenue increases due to consumers being worried about spending a lot of time in the outside world.
The coronavirus has been destabilizing the stock market to a degree, yes, but it has also created room for certain stocks to rise despite the overall market taking a dip.
Much like a brush fire in a forest can clear the way for a new crop of trees to grow, the coronavirus is making space for certain types of stocks to see significant gains in its wake.
As mentioned earlier, I’m dubbing them the coronavirus stocks. They are the companies best suited to see profits from the current market climate, with Netflix stock and Peloton stock being among the top coronavirus stocks right now.