JJerusalem-Washington
Center
Gideon Israel
WILL THE CORONAVIRUS VACCINE CAUSE
Will the coronavirus vaccine cause stay-at-home-stocks to lose value?
Almost a year has passed since the coronavirus became widely publicized. The good news is that there are currently three vaccines that have been approved: Pfizer, Moderna, and AstraZeneca, with potentially more on the way. The rollout for the vaccines, however, has been slower than anticipated in both Europe and the United States. The distribution speed will affect how quickly the economy in general as well as certain industries – for example, entertainment – return to full speed. Other questions, such as the effectiveness of the vaccine, especially in light of increasing new mutations of the coronavirus, will also influence the speed and scope of any return to normalcy.
Despite the slow rollout, even previous advocates of rigid lockdowns are now admitting that the economy must reopen as the cost of keeping the economy closed is too high.
Stay-at-home-stocks
The major benefactors of the lockdowns have been companies supplying products and services that have allowed the general public to continue their daily affairs and retain a semblance of normalcy while confined to their homes. In the markets, these companies are known as “stay-at-home stocks.” Many of these companies saw their stock value skyrocket when lockdowns began in the spring of 2020. Some took a small hit once successful trials of the vaccines were announced, though they have weathered that storm, since the impact of the vaccine has not been felt yet in the economy.
The question is: Are these “stay-at-home-stocks” still a good investment even though the economy may be fully reopening? Should investors return to industries hit by the pandemic, which should recover once the economy is at full speed? The answer to this question at least partially depends on whether human behavior will revert to how it was before the pandemic or if the pandemic has fundamentally changed the way we operate.
Three examples of stay-at-home-stocks
Zoom Video Communications Inc.
Zoom Video Communications is a cloud platform for video, voice, content sharing, and chat running across mobile devices, desktops, telephones, and room systems. During the pandemic, businesses increasingly used Zoom for all their communication needs - meetings, video conference calls, etc. Schools and universities began using Zoom as a temporary replacement for the classroom in the hopes of continuing frontal education throughout the pandemic. Since March 2020, Zoom doubled its share price by mid-June ($115 to $230), tripled by mid-September, and peaked at $568 in mid-October. Since the announcement of successful trials of the coronavirus vaccine, Zoom stock has been slowly declining and currently lists at approximately $350 per share.
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Amazon
Amazon is a leader in world e-commerce and a one-stop shop for just about any consumer product. Lockdowns, combined with people preferring to avoid malls and other stores for fear of catching the coronavirus, made Amazon the natural go-to for all consumer products from books to groceries, electronics, and more. In March 2020, Amazon stock was hovering at approximately $2000 per share. It increased to $3000 per share by mid-July, and price per share peaked at greater than $3500 in September 2020. In the last three months, cost per share has been floating at about $3100 per share, with the stock only being mildly affected by the announcement of the vaccine and its rollout.
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Peloton Interactive
Peloton Interactive is a company providing interactive fitness programs and technology enabled fitness machines. It wants its members to feel like they are at a fitness club while exercising from the comfort of their home. The company's founders came up with the idea after years of struggling to balance work, family, and being able to attend the workout classes they loved. As of September 2020, the company had 3.6 million members. Since March 2020, Peloton's stock price per share has increased six-fold from $25 per share to its current $156 per share.
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A post-pandemic world
The three stocks above represent three different parts of our life.
Amazon – consumer products
Peloton – recreation
Zoom – business communication
Will people return to the malls, the department stores, the outlets, and local businesses, or have Amazon and other e-commerce companies become more convenient and time saving?
Will businesses, having learned that they can operate virtually, saving costs on office space, and time spent traveling to and from work, revert back to normal or continue in a somewhat virtual setting?
Will recreation return to normal with people renewing membership to their fitness clubs, going back to the movies, and the arts, or will Netflix, Peloton, and similar companies become permanent alternatives?
How we behave in a post-pandemic world will have a significant influence on which stocks retain their value, plummet, or skyrocket.
