The Covid-19 pandemic has given a significant boost to the performance of some companies due to the changes in consumer behavior. While almost all businesses started adjusting their business to benefit from the changing consumer behavior, the companies that already had a pandemic-ready business have captured the majority of demand. Overall, the market’s skyrocketing rally until early September was primarily due to these companies.
The market started selling-off in early September as investors took profits, and there were concerns related to the stalled fiscal stimulus talks. While the market’s correction has not been significant, and many stocks have already started to recover, volatility will likely continue.
As there is no particular timeline for a solution to this deadly virus, people and businesses have been adapting necessary measures to stay afloat for a longer period. Many scientists and researchers predict a second wave of the deadly virus, particularly when the temperature goes down in the coming months. If that happens, the new-normal compliant businesses will see significant business growth. There is already a possibility of a second national lockdown in the UK. The “Work from Home” trend is here to stay with even big organizations like Twitter (TWTR), Facebook (FB), Microsoft (MSFT) focusing much more on remote working.
Whatever happens, the following stocks are set on a growth path based on their strong fundamentals: Amazon.com, Inc. (AMZN), Zoom Video Communications, Inc. (ZM), and Peloton Interactive, Inc. (PTON).
Amazon.com, Inc. (AMZN)
There is no denying that AMZN, which is the world’s largest online retailer, has dominated the e-commerce segment since the onset of the pandemic and Amazon Web Service (AWS) have been dominating the cloud computing industry. With a pandemic-ready business model and continued evolution of its offerings to capture the changing market demand, AMZN is well-positioned to gain should there be a second Covid-19 wave.
The stock has gained 94.6% since hitting its 52-week low of $1626.03 in mid-March. For the quarter ended June 2020, AMZN’s net sales increased 40% year-over-year to $88.9 billion. The numbers are set to soar with AMZN’s prime day, its biggest shopping event of the year, which is scheduled for October 13th and 14th.
On October 6th, the House Antitrust Subcommittee issued a report, mentioning the wrongdoing and anticompetitive behavior of AMZN and demanding action to change antitrust laws. However, except for a minor fall in the shares initially, the report failed to curb investor enthusiasm on the stock. AMZN’s EPS for the fiscal quarter ended June 2020 was $10.3, which surpassed the consensus estimate by 605.5%.
The market expects AMZN’s revenue to increase 32% in the current quarter, 31.5% in the current financial year and 18.3% next year. The company’s EPS is expected to increase 71.4% in the current quarter, 37.8% in the current fiscal year, and at a rate of 36% per annum over the next five years.
How does AMZN stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #9 out of 57 stocks in the Internet industry.
Zoom Video Communications, Inc. (ZM)
One thing is clear that remote working is here to stay with even many big organizations considering a shift to a permanent work-from-home setup. ZM definitely stands to benefit from this trend, being a company that provides cloud platforms for video, voice, content sharing, and chat, across mobile devices, desktops, telephones, and room systems. It helped students attend virtual classes and businesses bring together their teams virtually during this pandemic.
For the second quarter ended June 2020, it reported revenue of $663.5 million, up 355% year-over-year. With the current uncertainty and the market volatility, people are betting on dependable high growth tech stocks and ZM definitely fits the list. In fact, if there is a second wave of coronavirus, ZM could experience business growth at a higher rate. The market expects ZM’s revenue to increase 315.3% in the current quarter and 286% in the current financial year. The company’s EPS is expected to increase 744.4% in the current quarter, 611.4% in the current fiscal year, and at a rate of 38.5% per annum over the next five years.
ZM has an impressive earnings surprise history with the company surpassing EPS estimates in each of the trailing four quarters. In fact, even when the stock market crashed in mid-March due to the deadly virus, it soared and has gained over 623% year-to-date.
ZM’s strong fundamentals are reflected in its POWR Ratings, it has a “Buy” rating with an “A” in Trade Grade, and a “B” in Buy & Hold Grade, Peer Grade and Industry Rank. Within the Technology-Services Industry, it’s ranked #5 out of 53 stocks.
PELOTON INTERACTIVE, INC. (PTON)
PTON, which has made a big name for itself in fitness, provides interactive fitness products and operates through the connected fitness products, subscriptions, and others. It provides in-studio fitness classes, fitness clubs, at-home fitness equipment & content, and health & wellness apps. Going public in August 2019, the story of PTON started in 2012 when the now CEO and founder, John Foley understood the need for curating customized exercise classes which can be accessed from home itself at one’s convenience.
As of June 30, 2020, PTON had a loyal community of more than 3.1 million members. In the quarter ended June 2020, the company generated total revenue of $607.1 million, representing 172% year-over-year growth. The subscription revenue grew 99% year-over-year to $121.2 million. Around 20% of the total revenue was driven by strong connected fitness product sales.
The Apple Fitness+ which is yet to be released might pose a competition to PTON but the loyal subscribers of PTON who have experienced its ease and convenience are less likely to leave the brand. Moreover, while Apple is a bigger brand name, PTON has carved a niche for itself and is expected to continue to soar in 2021. A second wave of the coronavirus could further increase its subscriber base and revenue.
PTON has gained 523.8% since hitting its 52-week low of $17.70 in mid-March. As the demand for in-house fitness is rising steeply and could rise at a faster rate if there is a second wave of coronavirus cases. The market expects PTON’s revenue to increase 279.8% in the current quarter and 33% next year. The company’s EPS is expected to increase 108.5% in the current quarter, 137.5% in the current fiscal year, and 241.7% next year.
PTON’s strong fundamentals are reflected in its POWR Ratings, it has a “Strong Buy” rating with an “A” in Trade Grade, Peer Grade, Buy & Hold Grade and Industry Rank. Within the Consumer Goods industry, it’s ranked #5 out of 34 stocks.
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AMZN shares rose $17.20 (+0.50%) in after-hours trading Monday. Year-to-date, AMZN has gained 86.32%, versus a 11.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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