It is strange to think, but we are living in the history books of tomorrow. The global pandemic driven by the novel coronavirus (COVID-19) and its impacts are scarring the world. Society is evolving, and this pandemic will be the catalyst for a rapid change in human behavior. This is an exciting time to be investing, with stocks discounted and consumption patterns shifting, the market is rife with opportunity.
The world has been progressing towards one led by these two values: ease & convenience. Consumers search for it in every avenue of life, whether it’s shopping, entertainment, communication, or even working.
Shifting Consumption Patterns
Technology companies are the driving force towards ease & convenience and stand to gain the most from this consumer shift. The pandemic is conditioning the world to rely on technology in almost every facet of life.
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Consumers are relying on digital platforms for all their shopping needs, including groceries. Society depends on e-commerce giants like Amazon (AMZN) and Alibaba (BABA) to get them the goods they require, as this global lockdown restricts retails operations.
Despite grocery stores remaining open as ‘essential businesses,’ the pandemic has people afraid to leave their homes (especially at-risk individuals). Grocery delivery services have been stepping up to the coronavirus, so consumers don’t have to. Amazon Fresh, Walmart Grocery (WMT) , and Costco (COST) are leading the charge on grocery delivery, along with a cornucopia of other applications.
Social distancing and the self-quarantining measures have the world hunting for entertainment wherever they can, whether its video streaming or social media. Netflix’s (NFLX) newly released docuseries “Tiger King,”, has drawn an enormous amount of attention because of its absurdity and couldn’t have been released at a better time. People have been blowing through shows, and movies like there is no tomorrow. We are quickly running out of content to watch on our favorite streaming platforms, whether its Netflix, Prime Video, Hulu, or Disney+ (DIS).
There is a slew of new services on deck for release in 2020, including Quibi, Peacock (CMCSA), and HBO Max (T) . I expect that these services will be met with strong demand as consumers appetite for content grows.
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This pandemic has everyone addicted to their phones, scrolling through social media sites until their thumb hurts. Beijing-based social networking service TikTok has exploded since the beginning of the year with its short trend inciting videos. Facebook’s (FB) family of social media services like Instagram are all likely seeing an uptick in users as boredom sets in.
FB’s messaging apps like WhatsApp and Facebook Messenger are undoubtedly seeing an increase in usage as messaging may become the primary way people communicate.
With most of the world forced to work from home, cloud-computing has never been more important. The ability to access documents, software, and internal infrastructure from home is becoming vital for businesses to operate remotely.
Cloud-computing is red hot right now and is becoming the golden model for tech companies. Microsoft and Adobe (ADBE) are both examples of legacy tech names that successfully transitioned their businesses to the cloud, and their respective share price has reflected this success in recent years.
Infrastructure as a service (IaaS) is slowly becoming the norm for businesses around the globe, and this pandemic has only further illustrated its necessity. Cloud giants like Amazon’s AWS, Microsoft Azure (MSFT) , and Google Cloud (GOOGL) are leading the charge in IaaS with AWS as the leader, but Azure’s best-in-class platform is progressively taking market share.
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Platform as a service (PaaS) is a cloud service similar to SaaS; only it doesn't require the user to build a complex infrastructure or application. It allows users to manipulate the underlying code for their purposes without starting from the ground up. Twilio is one example.
Twilio (TWLO) is an AI-powered customer service cloud that enables companies to automate their customer service flow. Automation is likely to increase as a result of this economic downturn, with businesses looking for ways to cut costs.
Software as a service (SaaS) is the most complex type of cloud computing but gives the user the most flexibility.Today the SaaS space is red hot, and it is ripe with opportunity. Splunk (SPLK) is the leader in real-time data management and analytics, providing real-time actionable results for its clients.
The Opportunity
This pandemic has discounted the shares of all the publicly traded firms I discussed above. The short-term future of business is highly uncertain, and the stock market is reflecting that uncertainty.
The pandemic is accelerating the consumer trend towards technology reliance, and the enterprises I presented above have the most to gain. The equity market will recover as it always does, and I predict that these stocks will come out of the market downturn stronger than ever.
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Look for how these companies have weathered the pandemic so far in the forthcoming Q2 earnings. Forward guidance and management sentiment about operations are going to be critical to how these stocks will perform in the coming months.
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