2 resilient companies for a new variant of Covid
MMarket indices fell sharply on Monday as investors spooked news of a new variant of COVID discovered in South Africa. The Nasdaq Composite and S&P 500 both slipped more than 2% on Monday morning as investors digested the news.
Although there may be some investorsAn instinctive reaction to selling stocks, they might want to think carefully about stocks that could be good investments during times like these. Some companies may in fact be able to not only meet the challenges associated with a new variant, but also have business models that could benefit from the market dynamics created by consumers sheltering in their homes. On that note, here are two companies that could prove to be very resilient if another variant gains traction in the world.
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Focus on video communications
One of the most obvious potential winners of remote working environments is Zoom video (NASDAQ: ZM). Unsurprisingly, the stock jumped nearly 10% at one point on Monday morning. Investors are likely betting that the business can benefit from increased investment in virtual collaboration as businesses prepare to welcome more people to their homes around the world.
Adding to the attractiveness of Zoom stock, stocks have sold strongly recently as interest in them cooled after a spike in 2020. Zoom stock has fallen 33% this year, taking a break compared to a nearly 400% gain in 2020. Revenue growth has slowed considerably in recent times as Zoom faces tough comparisons a year ago and fewer people rely on remote working. Third quarter revenue increased 35% year-over-year. This is down from 54% growth in the second quarter.
Zoom’s revenue growth could, of course, re-accelerate if this new COVID variant becomes a serious global threat and consumers and workers begin to stay at home more.
An interesting and perhaps underrated technology company who is well positioned for tough times is an ad technology specialist PubMatic (NASDAQ: PUBM). While overall ad spend could suffer if demand for corporate products suffers or inventory is further limited due to a new COVID variant, programmatic advertising specialists like PubMatic could ultimately gain share of Marlet. As a catalyst for very nimble digital advertising markets where budgets can be easily adjusted on a whim and where advertisers can quickly turn to advertising products with the highest ROI, PubMatic may see increased interest from marketers.
Additionally, PubMatic is debt free, has positive cash flow, and benefits from a recent increase in sales (revenue has grown over 50% for four consecutive quarters). The company’s resilient go-to-market machine, aided by most of its overseas research and development in the economic Indian marketplace and a culture that fosters organic growth driven by innovation, means that PubMatic has strong fundamentals for uncertain times. Its debt-free balance sheet and profitability give its business model resilience. More importantly, its program-driven business model is likely to gain market share in digital advertising in a dynamic and rapidly changing advertising market.
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Daniel sparks has no position in any of the stocks mentioned. The Motley Fool owns stock and recommends PubMatic, Inc. and Zoom Video Communications. The Motley Fool recommends the Nasdaq. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.