While the pandemic caused immense losses for many businesses, certain stocks continued to soar. These businesses were able to capitalize on changes in the economy.
Mega-cap technology stocks were the biggest beneficiary as their operations and products were unaffected by social distancing or shutdowns. Additionally, interest rates plunged following the crash and Fed’s actions which placed a greater premium on stocks that could continue growing during the economy’s rough patch.
Amazon, Inc. (AMZN)
As one of the biggest e-commerce platforms in the world, with a market capitalization of $1.582 trillion, AMZN has gained considerable traction during the pandemic due to its efficient and timely doorstep delivery of a variety of goods and services.
Though the pandemic has severely affected small businesses, AMZN supported 2 million independent sellers in the trailing twelve months ending May 31st, 2020. The SMB sector sold more than 3.4 billion products through AMZN during this time.
AMZN gained more than 90% since hitting its 52-week low of $1626.03 on March 16th and returned more than 70% year to date.
AMZN recently launched its Amazon Interactive Service (Amazon IVS) for live and interactive video streams. As we are gradually getting accustomed to this virtual world, Amazon IVS expects to garner millions of users due to its low latency and easy configuration features.
Amazon Web Services (AWS) partnered with Global payments Inc. to devise a cloud-based issuer processing platform, which will allow financial institutions around the world to operate the entire lifecycle of card issuance and management.
AMZN’s net sales increased 40% year over year to $88.90 billion in the second quarter. Its net income increased 100% from its year-ago number to $5.2 billion. AMZN generated a free cash flow of $31.90 billion in the trailing 12 months ended June 30th, 2020 indicating a 27.6% rise year-over-year, while operating cash flow increased 42% over the same period.
The consensus EPS estimate of $7.22 for the third quarter indicates a 70.6% growth. Moreover, the consensus revenue estimate of $92.34 billion indicates a year over year growth of 32%.
How does AMZN stack up for POWR Ratings?
A for Trade grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
You can’t ask for better. It is also ranked #1 out of 54 stocks in the Internet group.
Tesla, Inc. (TSLA)
With a market cap of $274.441 billion and a 245% YTD gain, TSLA is one of the most sought-after stocks. Its gross profits increased 38% year over year in the second quarter, and its liquidity position improved significantly in this quarter, as cash and cash equivalents balance were $8615 million, indicating a year-over-year rise of 74%.
Despite the barriers imposed by the lockdown, TSLA managed to produce and deliver 82,000 and 90,650 vehicles, respectively.
TSLA has opened a new factory in China, which primarily manufactures Tesla Model 3 cars. It is also constructing another factory in Germany (expected completion date- July 2021) catering to the demand in the European markets. There are ongoing talks regarding another plant in southeast Asia.
With such expansion projects lined up, along with booming demand for electric cars, TSLA expects to grow substantially in the automotive segment.
As the global economy is adjusting to life in the “new normal” with the gradual reopening of businesses, TSLA is expected to generate significant profits in the last two quarters of 2020. The consensus EPS estimate of $2.67 for the third quarter indicates a 43.5% rise year over year. Moreover, TSLA has surpassed the street estimates in each of the trailing four quarters, which is impressive. Consensus revenue estimate indicates a 28% year-over-year increase in the upcoming quarter.
TSLA gained more than 40% to hit its 52-week high of $1794.99 on July 13th after hitting its year-to-date low of $350.51 in March.
Though TSLA is a “Neutral” under our POWR Ratings system, it has a “B” in Trade Grade. It is currently ranked #13 out of 27 stocks in the Auto & Vehicle Manufacturers Industry.
Paypal Holdings, Inc. (PYPL)
PYPL is one of the biggest financial services and digital payments companies used by merchants worldwide for transactions in different currencies, having a market cap of $236.082 billion. It allows users to hold and withdraw funds from their bank account and hold balances in multiple currencies. PYPL is the parent company of Venmo, Braintree, and Paypal Credit.
PYPL has gained popularity among the masses during the pandemic, as more commerce is being done through the digital economy. PYPL’s digital wallet has more than 130 million active accounts in the United States and 7 million active accounts in Canada. It recently partnered with RentMoola to ensure secure financial transactions and integrated solutions towards rental and utility bill payments.
PYPL announced hands-free QR code technology collaboration with CVS pharmacy to ensure safe transactions. This feature is available on the Venmo application as well.
PYPL’s second-quarter results were the strongest to date. Total payment volume of $222 billion increased 29% year over year while its revenue grew 22% to $5.26 billion year-over-year. Its revenue grew 17% year-to-date.
PYPL added 21.30 million new accounts in this quarter, marking a record for the company. PYPL’s cash flow from operations and free cash flow grew 103% and 112% year over year, respectively.
This momentum is expected to continue in the third quarter as well, as PYPL estimates its total payment volume to grow by 30% year over year on a spot basis. Revenue estimates indicate a 23% spot increase from its year-ago value. PYPL expects to add more than 70 active million accounts in the upcoming quarter.
The consensus EPS estimate of $0.93 indicates a 52.4% increase year over year in the third quarter. PYPL managed to beat the street estimates in three out of trailing four quarters, which is impressive.
PYPL gained more than 140% to hit its 52-week high this month after hitting its 52-week low of $82.07 in March.
PYPL is rated “Strong Buy” under our POWR Ratings system, with an “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is also ranked #1 out of 45 stocks in the Consumer Financial Services sector.
Netflix, Inc. (NFLX)
With a market cap of $223.893 billion, it is the biggest streaming in the world. NFLX has more than 183 million paid subscriptions in 190 countries. It is one of the most in-demand services currently, as people are turning towards indoor recreational activities.
NFLX gained $26 million in paid net subs in the first half of 2020 alone, a 166.7% increase from the $12 million revenue generated in the first half of 2019. Its global streaming memberships grew 27.3% in the second quarter alone.
Net Revenues of $6148 million generated in the second quarter indicates year-over-year growth of 24.9%. Operating income increased 92.4% year over year to $1358 million. Net income grew 165.6% to $720 million in the second quarter.
NFLX expects a revenue inflow of $6327 in the third quarter of 2020, indicating a 20.6% improvement year over year. The consensus EPS estimate of $2.12 for the third quarter indicates a 44.2% increase year over year.
NFLX hit its year-to-date low of $294.75 in March, due to the virus-driven market crash. The stock gained more than 90% to hit its 52-week high of $575.37 on July 13th.
Netflix is rated a “Buy” stock under our POWR Ratings system, consistent with its impressive performance throughout the first half of 2020. It has an “A” in Industry Rank and a “B” in Trade Grade and Buy & Hold Grade. Out of 54 stocks in the Internet group, NFLX is ranked #20.
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AMZN shares fell $5.25 (-0.16%) in after-hours trading Wednesday. Year-to-date, AMZN has gained 73.45%, versus a 4.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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