Global financial markets have seen some volatility this week as concerns about COVID-19 once again appear to be at the forefront and central to many investors. After weeks of declines, cases in the US have increased in recent days, particularly in states like New York, Florida, Michigan and Texas. Meanwhile, in Europe, a number of countries, such as Germany, France and the Netherlands, have reset or expanded lockdowns and other social restrictions.
The worrying development could disrupt "reopening trade," where investors have sold tech stocks that rose during the pandemic and turned into value stocks that are likely to benefit from the reopening of the economy.
Taking this into account, the two names below are well positioned to take advantage of such a scenario:
1. Netflix
Widely regarded as one of the great winners of the COVID-19 crisis, Netflix (NASDAQ 🙂 during the pandemic as measures to stay at home caused more people to turn to the entertainment streaming service. With concerns about the coronavirus resurfacing around the world, that habit is likely to pick up again in the coming months.
In another promising sign, the over-the-top content platform and production company recently announced that it would crack down on password sharing, a practice costing the streaming giant billions of dollars.
According to the latest estimates, about a third of customers who subscribe to Netflix share their passwords with family and friends who live outside the home. We expect this to result in an increase in the number of new paying subscribers at home and abroad in the coming weeks and months.
Shares of the Los Gatos, California-based streaming giant are down 1% so far in 2021, compared to its 4.1% gain over the same period. Investors have sold tech stocks that rose during the pandemic and bought back value stocks that would likely benefit from the reopening of the economy.
NFLX ended Tuesday's session at $ 535.09, about 10% below its all-time high of $ 593.29 reached on January 20, giving it a market cap of $ 233.5 billion. We believe the recent sell-off offers a good entry point, given the resurgence in coronavirus cases and renewed lockdowns in Europe.
2. Zoom Video
Another notable winner of the COVID-19 outbreak, Zoom Video Communications (NASDAQ 🙂 stock has fallen out of favor in recent months because advances in vaccination prompted states and countries to implement lockdowns and rollback of stay-at-home measures.
After rising to a record high of $ 588.84 on Oct. 19, ZM stock has lost momentum despite recent losses, dropping nearly 43% to $ 339.76 yesterday. Despite the recent sell-off, the stock is up 0.7% since the start of the year and 113% last year.
At current valuations, the San Jose, California-based video conferencing specialist has a market cap of $ 95.9 billion.
With fears growing over a new potential wave of the coronavirus – and subsequent blockages – it makes sense for investors to retreat to the cloud-based, teleconferencing service provider in the expectation that companies around the world will keep their offices. Closed.
In addition, sentiment about the name has recently improved following news that Zoom plans to license its video conferencing technology to other companies so that they can integrate it into their own apps and websites. Under the new model, Zoom would still enable the video calls, but not brand it as such, making its engagement invisible to users. According to Chief Technology Officer Brendan Ittelson, it plans to charge per minute, with the first 10,000 minutes per month free.
Through this move, Zoom – widely regarded as the leader in modern corporate video communications – will compete with Amazon (NASDAQ 🙂 and RingCentral (NYSE :), which already offer non-brand tools that can be embedded in other companies' products.
