MELBOURNE, AUSTRALIA / ACCESSWIRE / April 20, 2020 / Wall Street is betting big on stay-at-home stocks as the current global health emergency continues to upset the apple cart in all segments of the market.
Shares of companies that provide home entertainment and teleworking software have been the best performers as about one in five people across the globe are confined to their homes.
Looking at the bigger picture, extremely high stock market volatility has yielded opportunities on both sides of the market. The VIX index, the market's preferred gauge of volatility, hit the highest level since the global financial crisis in 2008. Historically, high values of VIX are almost always closely associated with times of uncertainty and deteriorating risk sentiment.
The old saying "every fall is an opportunity to stand" has never sounded more befitting than to describe certain companies, which set out to benefit from the surging number of people staying at home during the current health crisis.
According to ThinkMarkets, the U.S. equity markets rallied last week as President Trump unveiled plans for the gradual reopening of the national economy, which provided a boost for the overall risk sentiment.
Home entertainment
The red-hot shares of Netflix (NASDAQ:NFLX) have been stealing the show for the past few weeks. Analysts from Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and J.P. Morgan (NYSE:JPM) all issued a "buy" rating on the Netflix stock and further raised their price target for the stock..
"Content additions to the platform, combined with the value of Netflix's library to those staying home" due to the lockdown rules "drove this outperformance, more than offsetting the lingering impact of last year's price increase and growing competition in SVOD [Subscription Video on Demand]," analysts from Goldman wrote in a note.
We are now witness to a clear trend of investors betting heavily on streaming-service providers due to stay-at-home policies. As the Netflix stock hit a record high near the $450 mark, shares of one of its rivals, Roku (NASDAQ:ROKU), have gained more than 110% over the last month.
Roku, which offers access to streaming media content from various online services, said it expects to report almost 3 million new users for the first quarter, which is more than the 2.56 million net adds that Wall Street analysts had predicted. Moreover, the media streaming giant added it expects an increase of 49% in streaming hours year-over-year.
"The strength in streaming hours was partially offset by the addition of an ‘Are you still watching' feature in Q1, which ends video streaming after extended periods of user inactivity," RBC analyst Mark Mahaney said in a note.
Teleworking
When it comes to cherry-picking the hottest stocks on the markets right now, providers of remote-working software will certainly be noticed. These tech companies are benefiting from the widespread shift to a work-from-home economy, as firms across the globe want to keep their companies above the water in the face of unforeseen circumstances.
The clear winner in this category is Zoom Video Communications (NASDAQ:ZM), a provider of subscription-based video conference software, whose stock has gained 118% since the beginning of the year.
"We expect the virus to provide upside to estimates and for the platform and its products to drive increased market penetration and future cross-selling opportunities. We expect these impacts to continue to drive multiple expansion," analysts from Cantor wrote in a note.
Similarly to Zoom, Citrix Systems' (NASDAQ:CTXS) stock price hit a record high above the $150 handle yesterday. Citrix's software allows people to work remotely with a high focus on security. The digital workspace tech giant is scheduled to report its quarterly earnings on April 23 before the market opens.
Summary
As a result of lockdowns put in place by governments worldwide as a public health measure, about 20% of the world's population have been confined to their homes. Companies in the home entertainment and teleworking sectors have benefited as the products and the services they offer make isolation just a smidge easier to bear.
As a result, shares of stay-at-home stocks, such as Netflix, are hitting all-time highs as investors are betting heavily that sales of these companies will soar.
Media Details:
Name: Sergey Popov
Company: TF Global Markets
Email: [email protected]
Website: https://www.thinkmarkets.com/en/
SOURCE: TF Global Markets