Should Investors Buy These Stay-At-Home Stocks As They Dip?
Is the run for stay-at-home stocks over? The recent weaknesses in this space are not without reason. The highly positive news from Pfizer (PFE Stock Report) and Moderna (MRNA Stock Report) is the ‘culprit’ behind the plunge in these top stay-at-home stocks. Many tech companies focusing on video conferencing and cloud computing have seen their shares easily beating the market during the first half. The number of these stocks increased by a few folds just this year alone. However, the recent performance among these top stay-at-home stocks are making some investors nervous. But experts believe that we shouldn’t count them out yet. O’Neil Global Advisors’ Randy Watts notes that recent market leaders in the tech sector are struggling, but long term, he expects them to keep gaining.
It could be months before people start receiving vaccines, and likely even longer for things to return back to pre-pandemic levels. Many investors are speculating that when the pandemic ends, the enthusiasm for these stocks could diminish. Sure, the news from top biotech stocks is sending jitters to stay-at-home stock investors. But the third wave of coronavirus infections in the U.S. indicates that the crisis is far from over.
For these reasons, the stay-at-home trend could be here to stay for months to come. As they gain popularity, people will start to get used to getting things done online. And who knows, these things could become habits that are hard to get rid of. So if you ask me if the sell-off is overdone, I would agree to a certain extent. That’s considering the long-term potential these companies would be able to deliver to investors.
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Top Stay-at-Home Stocks To Watch Now: Zoom Video Communication
Zoom Video Communication (ZM Stock Report) is one of the best stay-at-home stocks in the stock market this year. The coronavirus pandemic has brought in millions of new users to the video conferencing platform, turning it into a household name. After a spectacular rally to $588 per share last month, ZM stock opened at $409 per share on November 19, a 30% discount from its all-time high. Despite the recent underperformance, there is also increasing speculation that ZM stock would be included in the S&P 500. Unlike many stay-at-home stocks, Zoom is actually profitable. And if the inclusion in the index really happens, we could see another breakout in ZM stock like what we saw in Tesla (TSLA Stock Report). After all, the company would be among the top quarter of companies in the S&P 500 by value.
Zoom already saw revenue growing by 88% in its fiscal 2020 which ended in January. Its adjusted EPS rose 483%. Now, it’s important to note that that’s before the peak of the pandemic. For the 6 months ended July 2020, Zoom’s revenue spiked 270% from a year ago as more people started working and school from home. Besides, many also used to keep in touch with friends and family. Those who signed up for Zoom’s premium packages are able to use the software without time limits, host meetings with more participants, and access cloud storage tools, and more.
It is increasingly evident that organizations are addressing their business continuity needs to support the future of working anywhere. Big multinational companies like HSBC, Facebook, and Google are all allowing their employees to work from home (or at least offer the flexibility). With solid figures backing Zoom’s growth, could ZM stock regain investors’ attention as a top tech stock to buy?
Top Stay-at-Home Stocks To Watch Now: Roku Inc.
Next up, Roku Inc (ROKU Stock Report) is also one of the biggest beneficiaries of the coronavirus pandemic. The cord-cutting phenomenon is likely to bring significant value to Roku shareholders in the long term. Shares of Roku jumped more than 10% on Thursday’s intraday trading. This came after a report stating that the company has closed a deal with AT&T (T Stock Report) to bring the HBO Max Channel to Roku’s platform. The report of these potential deals appears to be exclusive to members of The Desk, but the headline alone is enough to send investors on a buying spree.
Now, before jumping in, investors should take note that the two companies have not confirmed the report from The Desk. Nevertheless, it’s worth pointing out that HBO Max recently became available on Amazon’s (AMZN Stock Report) Fire TV just a couple of days ago. It would not be surprising if AT&T is pushing to get HBO Max on Roku as well. Should the deal materialize, it could be a boost for Roku. With HBO Max, Roku would be able to check another major media company off its list. Having more variety is certainly a positive for customers to stay on the platform and to encourage more to join.
What’s more, Roku reported an operating income this quarter, instead of a loss. Like many other streaming stocks, Roku has been aggressively pursuing revenue growth. Roku’s platform segment is a more profitable segment within the company. This segment saw revenue increasing 78% from a year ago. Gross margin grew to 61% from 57% a quarter ago. The rise in both revenue and profitability contributed to Roku’s operating income of $12 million. That is clearly a departure from the $26.5 million loss last year. Could this operating profit be a sign of bigger things to come?
Top Stay-at-Home Stocks To Watch Now: Teladoc Inc.
Teladoc (TDOC Stock Report) has all the characteristics to call for a bull run amid the stronger third wave of infections. Its shares skyrocketed 130% year to date when some of the sectors struggled to fight for a rebound. While the positive news from the vaccine front may dent investors’ confidence in the stock, the fundamentals of this telehealth company remain robust. Many consumers will continue to use the service until a large population in the world is vaccinated. In the process, some of them would realize the advantages of telemedicine and continue using the service even after the pandemic. Now that Teladoc is trading at a more reasonable level than where it was a month ago, would you bet on TDOC stock?
Granted, as the largest telemedicine company on a U.S. stock exchange, Teladoc certainly has reasons to shine. It appears to have a tendency to surpass sales expectations. Full-year revenue could rise to $1 billion this year. Considering that 2013 revenue was about $20 million, the company has certainly come a long way. Revenue grew at an annualized rate of 75% during this period. The dominance of the telehealth platform became even more pronounced in August. That came as the company announced the acquisition of Livongo Health (LVGO Stock Report) for $18.5 billion in a cash and stock deal. The combined company could offer phenomenal growth potential in the long run, if analysts’ projections materialize a few years down the road.
In fact, telehealth is not something new. The service has been available for the past few years. But it is only gaining strong traction during the coronavirus pandemic. A commanding lead in a rapidly growing niche makes TDOC stock one of the best coronavirus stocks to buy. The long term prospects of telemedicine remain favorable. With more users now discovering the advantages of remote medicine, TDOC stock might be able to continue to thrive even after the pandemic.