The past month has seen a historic fall in global stock markets as the coronavirus pandemic becomes a reality, triggering unprecedented uncertainty. But while revenue and growth are at risk today, companies that weather the storm will be in strong positions to grow with both existing and new business models. Agility will be key to helping their customers adapt as well.
Here are seven companies that have the customer base, balance-sheet strength, cash flow as well as the right products and services that could lead to a fast bounce back.
One of the first companies to acknowledge coronavirus and the Covid-19 illness it causes, Apple (AAPL) was quick to adjust its projections for revenue and earnings per share as it shuttered its stores, first in China and then globally. Now stores in China are beginning to reopen.
Apple is still selling devices online, and the moment stores that are still closed are able to open up again, you can count on customers funneling back in. Despite Apple’s smallish market share in mobile devices and laptops, the company leads the industry in margins and its customer base is loyal—even when its products are more expensive and/or lack features, like 5G. More importantly, if social distancing becomes the new norm, we anticipate an increase in consumer demand for personal devices. I also expect Apple to be creative in offering incentives such as long-term financing and trade-in programs to propel consumers to upgrade devices sooner than they may have planned.
While America’s most innovative mobile chip maker has lost over a third of its market value in the last two months (falling from $109.5 billion on Jan. 21 to around $75 billion today), Qualcomm (QCOM) still stands to benefit from the growth in 5G all over the world.
With Asia coming back online and as one of the most aggressive adopters of 5G, Qualcomm’s licensing and chip business could see a surge as market activity resumes and 5G networks and device adoption picks up. Mobile device usage will not slow in the wake of this. If anything, it will accelerate, and Qualcomm will see its technology and patents drive revenue from our collective growing attachment to our devices.
While Wall Street darling Zoom Video Communications (ZM) has received most of the attention over the massive move to remote work because of coronavirus, Cisco owns Webex, one of the world’s leading collaboration platforms.
Like other collaboration platform, Webex has had a surge in business since the start of the pandemic-driven work-from-home effort around the world, yielding a whopping 6.7 billion meeting minutes this month through March 19. This represents two to four times pre-coronavirus volumes.
Cisco is also diversified, with a plethora of tools to support more secure remote work, and of course support continued growth of network and enterprise—all of which will pick up as things return to normal.
With its dividend hovering around 3.8% looking safe for now, the stock could also attract investors looking for stability.
In my 2020 predictions published on MarketWatch, I stated that semiconductors will eat the world. While I certainly didn’t predict a catastrophic event like COVID-19 to bring the economy to a standstill, what I did see was the growth of computing at the edge (data being processed closer to where it is created), in the data center and, of course, devices. But as we recover from this pandemic, Intel (INTC) (and Advanced Micro Devices (AMD)) should see a surge in demand as both companies and schools must rapidly outfit global workforces and students learning online en masse with new and improved devices. This is also true for datacenter and cloud compute, both heavily dependent on Intel chips.
Looking at Intel’s strong balance sheet, it is also easy to like the company’s trailing 12-month cash flow of more than $33 billion, which couples nicely with its dominant market share in data center and PCs.
Amazon (AMZN) has been a staple during this crisis, with a massive increase in online sales amid consumers shunning in-store services for deliveries in the wake of shelter-in-place orders and a general wariness to leave their homes.
Its AWS cloud-computing business — the world’s largest Infrastructure-as-a-Service offering by market share — will likely see some volatility in revenue associated with industries that are deemed non-essential or industries being hammered, such as travel, hospitality and most retailers. Therefore I wouldn’t be surprised to see AWS offer its customers some ways to defer cloud credits without breaching contracts.
That said, it’s inevitable that some companies won’t survive this economic downturn, and that will translate into a near-term hit for AWS. The Amazon unit did around $10 billion in revenue last quarter, representing only 11% of the parent’s revenue but nearly two-thirds of its profit. Look beyond that, however, and AWS will continue to shine brightly as it is a critical business service. Companies impacted by COVID-19 will depend on it to get operations quickly back up and running.
Artificial intelligence and machine learning are going to get even bigger given that data science is at the forefront of the medical and research community’s efforts to understand, contain and develop treatments and vaccines for this pandemic (and to plan for others). Nvidia (NVDA) has some of the most robust frameworks for machine learning, and the company had made its Parabricks tool (a GPU-accelerated genome sequence tool) free for 90 days to biotech and research companies looking to flatten the coronavirus curve, develop therapeutics, and/or expedite vaccinations.
At the same time, more people are playing video games as their cities went into lockdown, and sales of Nvidia chips and services like GeForce Now have all likely seen an increase. The company has a strong cash position with over $10.9 billion in cash and equivalents as of its last earnings report in late January. This, coupled with very low long-term debt, bodes well for the company.
The company’s earnings report amidst the storm showed its best revenue growth in two years. This, however, doesn’t take into consideration the current quarter and the global impact the coronavirus COVID-19 is sure to have. I expect the company will see some lost or deferred revenue as a result.
That aside, about 71% of Oracle’s revenues are recurring, which means that so long as their clients stay in business, the company’s income statement is largely in good state. Given that Oracle claims some 97% of the Fortune 500 as customers, I expect the company to come out in pretty good shape. It also helps that Oracle is trading at 10 times trailing earnings, at the low end of its usual 9-to-19 times range.