Telecommuting has been on the rise for many years. But it’s still not the norm. And that’s why, in the wake of our society’s call to flatten the curve of the coronavirus, more Americans find themselves in the unfamiliar position of working from home.
Aside from the mental and emotional challenge that some employees face from not having a defined workplace outside of the home, there are logistical challenges for businesses to ensure their employees can manage their work efficiently and effectively.
However, other Americans are sequestered, not by choice, but because they have no business to go-to for the time being. They face a different, unique set of challenges as more and more states begin to close bars, restaurants, and other social meeting venues.
It all happened so fast. And as an investor, it may be tough to think of investing in the market now, or ever again. But history favors those investors who have stayed the course even in the midst of a severe bear market that will quite possibly dip the economy into a recession.
And that’s why we’ve identified 8 technology companies that are poised to have a breakout moment in this time of social distancing.
Quick Links
- Netflix
- Comcast
- Cisco
- Zoom
- DocuSign
- Microsoft
- Twitter
- Teladoc Health
#1 - Netflix (NASDAQ:NFLX)
One of the biggest beneficiaries of the world being stuck indoors is Netflix (NASDAQ:NFLX). The FAANG stock was facing a harsh reality as more competitors were entering the streaming space. But the imposed social distancing is creating an opportunity for Netflix for two reasons.
First, they have the advantage of simply being available. Although their most recent earnings report showed the company is losing subscribers, the company still has one of the strongest user bases in the streaming industry.
Second, unlike a snowstorm or other external event that keeps people at home, the coronavirus has shut down the world of sports. Netflix can successfully compete with traditional television programs and movies. It has a harder time being a choice for viewers over events like March Madness, the NBA playoffs, and the Masters. All of these events have been canceled or postponed in the wake of the coronavirus.
The long-term outlook for Netflix still presents some challenges. Competition is only increasing. And while consumers are showing they may have an appetite for more streaming services than they have previously suggested, Netflix still faces some tough math. They will almost certainly lose more subscribers as their most popular title, The Office, exits the platform in 2021. And, while they have a solid track record of Netflix original series, those programs cost a lot of money to produce. Declining revenue and rising costs is not a good formula, but as a short-term pick the stock looks good.
About Netflix
Netflix, Inc provides entertainment services. It offers TV series, documentaries, feature films, and games across various genres and languages. The company also provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices.
Read More - Current Price
- $926.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 9 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $783.00 (15.4% Downside)
#2 - Comcast (NASDAQ:CMCSA)
Social distancing still requires being connected, and that’s good news for Comcast (NASDAQ:CMCSA). College students are now attending the University of Home, remote workspaces are now the norm. And with nowhere to go, the demand for online streaming services will be greater than ever.
Comcast can deliver for customers in a couple of key ways. First, their Xfinity subsidiary is a monopoly in certain areas. For example, in my neighborhood, Comcast Xfinity is the only provider of high-speed internet. It’s an overlooked point that in many areas, Comcast is the only game in town. And in times like these, that’s an important advantage.
Another advantage that Comcast is developing is the company’s emerging Peacock streaming service. According to Graybo, the digital video editing and production platform, while many consumers continue to cut the cord, an increasing number are finding value in their current cable provider. Peacock is promising a service that has a cable feel on a streaming platform. And it gives Comcast an important first-mover advantage.
The company is also doing its part to help in the Covid-19 crisis by offering two free months of internet service for low-income veterans. After the two-month trial, veterans can continue the service for as low as $9.99 per month.
About Comcast
Comcast Corporation operates as a media and technology company worldwide. It operates through Residential Connectivity & Platforms, Business Services Connectivity, Media, Studios, and Theme Parks segments. The Residential Connectivity & Platforms segment provides residential broadband and wireless connectivity services, residential and business video services, sky-branded entertainment television networks, and advertising.
Read More - Current Price
- $42.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $47.19 (10.1% Upside)
#3 - Cisco (NASDAQ:CSCO)
It’s possible that this period where many Americans are forced to work from home may make some of the trends that have been in place for some time a permanent part of our culture. One of the trends is the use of virtual private networks (VPNs). And Cisco (NASDAQ:CSCO) is one of the leading manufacturers of these networks. According to Mark Rounds, a management information systems instructor at the University of Idaho, this is only the beginning of a long-term trend towards employees using VPNs to work from home.
Cisco addresses a key need for businesses to have a proper work-from-home infrastructure. “Coronavirus may expose the underlying weakness of the existing telecommuting infrastructure on both the corporate and public side,” said Rounds. “Companies supplying the hardware that will be used to build a more robust infrastructure will increase in value and the prices of their products will be driven higher.”
And Cisco is more than just a hardware play. The company has Web-Ex “the leading enterprise solution for video conferencing, online meetings, screen share, and webinars.”
Cisco is also seeing nice growth in its security business. And while this business has a lot more competition, Cisco can benefit from being able to provide a secure, and functional work-from-home infrastructure. And like many stocks right now, Cisco stock is selling at a heavy discount from its 52-week highs.
About Cisco Systems
Cisco Systems, Inc designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company also offers switching portfolio encompasses campus switching as well as data center switching; enterprise routing portfolio interconnects public and private wireline and mobile networks, delivering highly secure, and reliable connectivity to campus, data center and branch networks; wireless products include wireless access points and controllers; and compute portfolio including the cisco unified computing system, hyperflex, and software management capabilities, which combine computing, networking, and storage infrastructure management and virtualization.
Read More - Current Price
- $60.06
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $59.94 (0.2% Downside)
#4 - Zoom (NASDAQ:ZM)
Speaking of video conferencing, Zoom (NASDAQ:ZM) is one of the most talked-about stocks in recent weeks. As employees work from home, it may very well change how employees and employers think about the need for meetings. But that’s a different discussion.
Until then, there’s Zoom, a competitor of WebEx. The outbreak of the coronavirus is providing Zoom with a moment to shine. That’s because schools, universities, and even children’s playgroups are finding applications for the company’s software.
The stock is up 90% in 2020 as of March 20. And since nobody knows how long this forced sequestering will last, Zoom has a nice long runway for investors. Plus, according to Needham analyst Richard Valera, the stock still has room to grow.
“We think Zoom’s exceptionally easy to use meetings product has both enabled and benefited from a long-term secular shift towards working from home,” says Valera. “We think Covid-19 is driving an enduring application of this shift. In the near-term, our checks confirm significant increases in business activity, especially in Covid hotspots, which admittedly could be mitigated by delays in closing larger enterprise deals.”
About Zoom Video Communications
Zoom Video Communications, Inc provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices.
Read More - Current Price
- $83.78
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 15 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $85.19 (1.7% Upside)
#5 - DocuSign (NASDAQ:DOCU)
DocuSign (NASDAQ:DOCU) is another company that may find itself in the right place at the right time. Many consumers and businesses were already using DocuSign to securely scan and email important documents. That usage will only increase not only during this period of social distancing, but into the future.
You can also say that DocuSign is a beneficiary of perfect timing. The company posted a strong revenue increase of 39% for its 2020 fiscal year that ended on January 31, 2020. The company also posted positive forward guidance of a 31% revenue gain for fiscal 2021. DocuSign is on pace to log $1 billion in revenue, putting it in elite company among software-as-a-service (SaaS) companies.
The two catalysts that DocuSign believes can carry them through this slowdown and beyond are their efficiency and ability to set-up businesses remotely. If the economy does tip into a recession, DocuSign feels that the return on investment (ROI) that businesses receive will be obvious. And, as more companies resist the idea of having technicians come on site, DocuSign’s CEO Dan Springer says that, with the exception of some of its largest enterprise clients, the company can do most installation remotely.
Despite the sell-off in the market, DocuSign stock is still up about 5% for 2020.
About DocuSign
DocuSign, Inc provides electronic signature solution in the United States and internationally. The company provides e-signature solution that enables sending and signing of agreements on various devices; Contract Lifecycle Management (CLM), which automates workflows across the entire agreement process; Document Generation streamlines the process of generating new, custom agreements; and Gen for Salesforce, which allows sales representatives to automatically generate agreements with a few clicks from within Salesforce.
Read More - Current Price
- $83.85
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $70.73 (15.7% Downside)
#6 - Microsoft (NASDAQ:MSFT)
Microsoft (NASDAQ:MSFT) has not been immune from the market sell-off. However, there was talk since the beginning of the year that Microsoft was overbought and investors were probably looking to take some profit. However, MSFT stock is down about 15% for the year and looks like it’s trying to form a base.
The reason I’m optimistic about Microsoft’s recovery has to do with Teams, the company’s entry into the productivity software space. Teams is a newcomer to a space in which Slack (WORK) is an established competitor. Like Slack, Teams combines features of social networking with productivity and collaboration tools. Employees can instant message and share files.
However, Microsoft Teams is growing faster than Slack and Teams will be an attractive addition to the company’s Office 365 suite of products. In fact, one of the catalysts for Microsoft is that they have an existing relationship with many customers. And as they continue to expand in cloud computing, via its Azure platform, it has an easy point of entry to introduce customers to Teams.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $442.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $504.36 (13.9% Upside)
#7 - Twitter (NYSE:TWTR)
It’s not surprising that in this period of sheltering I’m seeing social media posts from people I haven’t heard from in years. While many social media sites should see an increase in daily active users (DAUs), I like Twitter (NYSE:TWTR).
An argument against social media stocks right now is that advertisers are unlikely to continue to pay a premium for ad space. Since Twitter, like Facebook (FB) and Google (GOOGL) rely on advertising revenue, it would make sense that the company would see their share price decline.
However, supply and demand still rules the roost. And Twitter is, for better or worse, becoming a key source of news for many Americans. What started out as a space for quirky, short posts has turned into a go-to source for journalists and media outlets to drop breaking news. It also is a place of (ahem) lively discussion.
That’s a combination that should entice advertisers to at least continue advertising on the platform. And since Twitter has announced aggressive steps to fight misinformation about the coronavirus, they are hoping to convince advertisers that they should still be a sought-after platform.
About Twitter
Twitter, Inc operates as a platform for public self-expression and conversation in real-time. The company's primary product is Twitter, a platform that allows users to consume, create, distribute, and discover content. It also provides promoted products that enable advertisers to promote brands, products, and services, as well as enable advertisers to target an audience based on various factors, including who an account follows and actions taken on its platform, such as Tweets created and engagement with Tweets.
Read More - Current Price
- $53.70
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#8 - Teladoc Health (NYSE:TDOC)
Teladoc Health (NYSE:TDOC) is a stock for investors with higher risk tolerance. The company is not yet profitable, but it’s about to have a massive opportunity. The Trump administration has authorized an expansion of services like the kind provided by Teladoc and other companies.
Several states, although admittedly not a flood of them, are expanding their telehealth services. The goal is to allow doctors and patients to easily connect online. The state of Washington is moving to allow doctors to treat patients voluntarily even if they are not licensed in the state (they must be licensed elsewhere).
Currently, 260 doctors have volunteered, but the vetting process will take months. And then getting licensed can is still a lengthy, and expensive, venture.
I have to admit, I struggle with the idea of receiving a virtual diagnosis. But this may be the way society will move. If contagious patients can be kept away from a doctor’s office, but still get the care they need, it could be a major win.
As of March 20, TDOC stock was up 70% for the year.
About Teladoc Health
Teladoc Health, Inc provides virtual healthcare services worldwide. The company operates through Teladoc Health Integrated Care and BetterHelp segments. The Integrated Care segment offers virtual medical services, including general medical, expert medical, specialty medical, chronic condition management, and mental health, as well as enabling technologies and enterprise telehealth solutions for hospitals and health systems.
Read More - Current Price
- $10.83
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $12.24 (13.0% Upside)
Things may seem bleak at the moment. The coronavirus is sapping a little of our nation’s national energy. But we are an adaptable society. And adapting we are. If you were paying attention last week, stocks tended to rally on the hint of a medical solution.
A vaccine is months if not a year away. But antivirals may be much closer. Until then, Americans are being asked to stay indoors as much as possible. And if they do have to go out, they are being tasked with maintaining an appropriate social distance.
As we put our faith in science, we are also increasingly going to be putting our trust in technology. The companies that we’ve discussed in this presentation will be helping Americans find comfort, work efficiently, provide routine, and perhaps even stay healthy in the coming weeks and, perhaps, months.
Every crisis changes society in some ways. And that will be the case in the aftermath of the coronavirus. The definition of where, and how, we work may be redefined forever. And these companies are likely to be part of that changing economy.
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