The winter months are on track to be the worst months of the pandemic in the US as new coronavirus cases continue to surge. With regulatory restrictions of the late-stage vaccines and projected supply shortages, this second wave is expected to be a repeat of last year and should drive up demand for cloud-based websites, digital platforms, and virtual entertainment significantly.
There has been a noticeable increase in internet consumption as people across the world have been housebound since the onset of the pandemic. While summer was seen as a reprieve for many, newly surging cases are leading to hospitals hitting capacity. This will likely result in some sort of lockdown and continued social distancing
With a second wave hitting major economies around the globe, stay-at-home stocks like Amazon.com, Inc. (AMZN), PayPal Holdings, Inc. (PYPL), Roku, Inc. (ROKU) and Cloudflare, Inc. (NET) are expected to witness robust growth in demand.
Amazon.com, Inc. (AMZN)
AMZN, the world’s largest e-commerce giant, has successfully solidified its power this year, as online shopping becomes more entrenched during the coronavirus pandemic. Amid a second COVID-19 wave, the company is well positioned to gain from its online streaming services as well, since more and more housebound users are seeking out online entertainment platforms.
On November 24th, AMZN announced that Zalando has selected AWS to run all of its machine learning workloads. This will enable AMZN to broaden its comprehensive cloud platform to meet the increasing consumer demand.
On November 17th, the company launched Amazon Pharmacy to enable customers to purchase their medications online through the app. This expansion will help the company to serve more customers, while tapping into a new branch of retail operations.
AMZN’s revenue increased 37% year-over-year to $96.14 billion in the third quarter that ended September 2020. Operating income increased 93.8% from the year-ago value to $6.19 billion, while EPS rose 193% from the prior-year quarter to $12.63.
The consensus EPS estimate of $7.09 for the fourth quarter ending December 2020 indicates a 9.6% increase year-over-year. Moreover, AMZN has an impressive earnings surprise history, with the company beating consensus EPS estimates in three out of the trailing four quarters. The consensus revenue of $119.44 billion for the current quarter indicates a 36.6% increase from the same period last year. The stock has gained 72.9% year-to-date.
How does AMZN stack up for the POWR Ratings?
A for Industry Rank
B for Buy & Hold Grade
B for Overall POWR Rating.
It is also ranked #14 out of 59 stocks in the Internet industry.
PayPal Holdings, Inc. (PYPL)
PYPL is a global leader in financial services, facilitating online money transfers. The company has seen unprecedented demand amid the pandemic as stay-at-home orders have pushed people to use digital means of transaction. PYPL is expected to witness a substantial rise in digital payments, with rising e-commerce demand during the holiday season.
On September 23rd, the company announced that it will continue with its expansion of the popular PayPal Business Debit Mastercard with Mastercard Incorporated (MA), to five new European countries. This expansion will drive business growth internationally.
PYPL’s revenue increased 24.7% year-over-year to $5.50 billion for the third quarter that ended September 2020. Non-GAAP net income increased 41.7% year-over-year to $1.30 billion, while Non-GAAP EPS grew 40.8% from the year-ago value to $1.07 in the third quarter.
The consensus EPS estimate of $0.99 for the current quarter ending December 2020 indicates a 15.1% increase year-over-year. Moreover, PYPL has an impressive earnings surprise history, with the company beating consensus EPS estimates in three out of the trailing four quarters. The consensus revenue of $6.09 billion for the current quarter indicates a 22.7% increase from the same period last year. The stock has gained 95.4% year-to-date.
It’s no surprise that PYPL is rated a “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Industry Rank. Among the 46 stocks in the Consumer Financial Services industry, it is ranked #2.
Roku, Inc. (ROKU)
ROKU is a TV streaming platform that allows users to access various movies and TV shows, as well as live sports, music and news. The company operates through two segments – Platform and Player. It offers a Roku software developer kit that enables developers to build a channel that streams their content to the TV.
The company recently announced the launch of its new streaming lineup Roku Ultra and the Roku Streambar in the United States. These top-performing and innovative products will allow the company to generate greater revenue through rising subscriptions.
ROKU’s net revenue increased 73% year-over-year to $452 million in the third quarter that ended September 2020. Gross profit rose 81.3% from the prior-year quarter to $214.82 million, while gross margin rose 216 basis points year-over-year to 47.6%.
The consensus EPS estimate for the current quarter ending December 2020 indicates a 30.7% improvement from the year-ago value. Moreover, ROKU beat the street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $600.67 million for the current quarter indicates 46.1% growth from the same period last year. The stock has gained 105.6% year-to-date.
ROKU’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” for Industry Rank. It is ranked #3 out of 30 stocks in the Technology – Hardware industry.
Cloudflare, Inc. (NET)
NET is a leading cloud platform offering integrated cloud-based security solutions to secure public cloud, private cloud, on-premise, and software-as-a-service applications. The company protects an organization’s internal resources against malware or cyberattacks.
On November 10th, NET announced its plans to expand its office in Paris with a focus on customer success, innovation, and growth, thereby increasing its international market presence.
The company recently announced the launch of Cloudfare One to keep workforces and remote teams secure. With the rapid shift to remote work caused by the pandemic, this platform will improve security and user experience.
NET’s revenue increased 54% year-over-year to $114.20 million in the third quarter that ended September 2020. Gross profit rose 50.5% from the year-ago value to $87.16 million.
The consensus EPS estimate for the current quarter ending December 2020 indicates a 50% improvement from the year-ago value. Moreover, NET beat the street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $118.26 million for the current quarter indicates a 40.9% growth from the same period last year. The stock has gained 338.2% so far year-to-date.
NET’s promising outlook is reflected in its POWR Ratings. It is rated a “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. It is ranked #2 out of 23 stocks in the Software – Security industry.
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AMZN shares rose $2.16 (+0.07%) in after-hours trading Monday. Year-to-date, AMZN has gained 71.45%, versus a 14.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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