The coronavirus from China has had mixed results on the markets. When the outbreak first made headlines, the market took a dive. But with last week seeing major indices reaching new highs, perhaps this global health crisis will not break the runaway bull market.
Yet many stocks continue to be hammered due to their exposure to the crisis. Some of this sell-off is justified. Casino operators Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands (NYSE:LVS) could see big losses if Macau’s casinos continue to be closed. Restaurant stocks such as Starbucks (NASDAQ:SBUX) could see an impact due to store closures as well. Despite the indefinite nature of the crisis, all these stocks continue to trade at high valuations. Still “priced for perfection,” these names could see additional short-term downside.
On the other hand, there are plenty of impacted stocks to buy after the sell-off. The three names below have risks associated with the event, yet given other fundamentals at play, could see a rebound once the situation dissipates. Let’s dive in and see why these three names are stocks to buy this week.
Coronavirus Sell-Off Stocks To Buy: Canada Goose Holdings (GOOS)
Trendy apparel maker Canada Goose Holdings (NYSE:GOOS) has been hit hard in the past year. But after the company reported the coronavirus is having a material impact on results, shares have traded even lower. Yes, there are headwinds, but at today’s prices, GOOS stock could one many impacted stocks to buy this week.
Why? While the current crisis could impact the company short-term, long-term the company is still on target. As pointed out by Seeking Alpha, GOOS stock could move higher as the company pivots to a high-margin direct-to-customer model.
At first glance, GOOS stock does look expensive. But despite a forward price-to-earnings (P/E) ratio of 31.2, shares are a bargain compared to high-end brand peers like Lululemon Athletica (NASDAQ:LULU). Lululemon trades at a forward P/E of 49.7. On an enterprise value/EBITDA basis too, Canada Goose trades at a lower multiple (19.9) than LULU stock (33.5).
Growth may be slowing down, but analysts estimates call for earnings to grow from $1.02/share in FY20 (ending March 2020) to $1.45 in FY21 (ending March 21). Combined with the potential for multiple expansion, there’s plenty of reason to buy GOOS stock while shares remain depressed.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is another name indirectly impacted by the coronavirus. Nearly 50% of Qualcomm’s sales come from China. On February 5, the company announced the crisis could impact the smartphone space. As a leading supplier of mobile chips, this isn’t a good sign for QCOM stock.
But don’t let this event impact your decision to buy QCOM stock. While shares remain close to their 52-week high, more upside is possible thanks to two key catalysts. The first is 5G. Its safe to say Qualcomm’s future growth is 5G-driven. Perhaps too dependent on 5G, as InvestorPlace’s David Moadel discussed February 3. Yet the impact of coronavirus on the “year of 5G” could be just a temporary headwind. With anticipated growth in 5G mobile chip demand, Qualcomm could head higher throughout the year.
Secondly, there is potential upside if Qualcomm wins its appeal of last year’s Federal Trade Commission (FTC) ruling. The FTC ruled that the company’s “no license, no chips” policy is anti-competitive. This seriously impacts QCOM stock, which is highly reliant on the strength of its licensing business. But with the Trump administration in Qualcomm’s corner, the odds could be in Qualcomm’s favor to win the appeal. Both catalysts make it one of many great stocks to buy after the sell-off.
Royal Caribbean Cruise Lines (RCL)
Royal Caribbean Cruise Lines (NYSE:RCL) stock is another name unfairly beaten down by the coronavirus. Despite just 6% of its business impacted by the crisis, shares have fallen from above $130/share in mid-January to $111.15 at the close February 7.
Yet, as discussed in Barron’s 2020 Roundtable, Delphi Management’s Scott Black remains bullish on RCL stock. Besides the coronavirus, Royal Caribbean faces other short-term disruptions. But, long-term trends are on the company’s side. InvestorPlace’s Josh Enomoto included as one of many stocks to buy that profits off the baby boomer generation. Baby boomers continue to control half of the country’s household wealth, with that figure only dipping to 45% in 2030. An affluent, aging demographic is the perfect recipe for strong cruise ship demand.
RCL stock also trades at a low valuation (10.8 times forward earnings). This is on par with rival Carnival’s (NYSE:CCL) forward multiple. But, with RCL trading at a P/E of 15 just a few years back, valuation could improve as coronavirus becomes yesterday’s news.
As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
