As you may have heard, the Delta variant has led to a startling increase in Covid-19 cases around the world. Now, headlines have meant increased choppiness in many stocks. However, there are some picks — we’ll call them coronavirus stocks — that could resist any more bad news.
Of course, this variant has come at a time when we’re seeing very high inflation rates. Specifically, inflation is now at 5.4% — the highest level since 2008. True, Federal Reserve Chair Jerome Powell has indicated that interest rates will not be raised again anytime soon. Still, policy makers could also pause their market-friendly monetary policies to stimulate the economy, if it feels like levels will continue to climb.
So, with all of this in mind, many market participants are now positioning their portfolios for a possible downturn in broader markets, which are at record highs. This is how the major indices have fared year-to-date (YTD):
- Dow Jones Industrial Average — up about 14%
- S&P 500 — up about 18%
- Nasdaq 100 — up about 17%
Delta variant aside, though, investors should not lose heart. There are still encouraging signs in the market, such as soaring consumer spending. When it comes to uncertain times, investors need only be more selective about which stocks to buy, focusing on companies that could rebound after another potential pullback. They should also refrain from overcommitting to typical pandemic investment themes in order to ride out of the current wave of volatility.
These seven coronavirus stocks could help you do just that. Not only are they lockdown-resistant, but they also have significant upside potential come a high-growth scenario.
- Ciena (NYSE:CIEN)
- Constellation Brands (NYSE:STZ)
- Cyberark Software (NASDAQ:CYBR)
- Datadog (NASDAQ:DDOG)
- Electronic Arts (NASDAQ:EA)
- Fiverr (NYSE:FVRR)
- Teladoc Health (NYSE:TDOC)
Coronavirus Stocks to Buy: Ciena (CIEN)
52-week range: $38.03 – $61.52
Ciena is a company that offers network hardware, software and services that facilitate and support video, voice and data traffic on communications networks. This company serves a variety of customers, from communication-service providers to governments and large enterprises around the globe.
CIEN released its second-quarter results back in early June. For the period, revenue fell roughly 7% year-over-year (YOY) to $834 million. Net income also came in at $103 million, or 66 cents per diluted share, up from $91.7 million (or 59 cents) in the prior-year quarter. Lastly, cash and equivalents ended Q2 at $1.2 billion. On the results, CEO Gary Smith said the following:
“We delivered strong fiscal second quarter results as we continued to see encouraging signs in the market environment, including improvements in customer spending.”
Currently, demand for Ciena’s products and solutions is thriving, thanks to the ongoing construction of 5G networks and data centers, among other things. Additionally, an improved product mix and increase in software revenue will likely lead to increased margins in the future.
CIEN stock hovers around the $57 mark as of Aug. 5. This name is up 7% YTD. Investors looking to add a growth stock to their portfolios may consider buying CIEN. Today, it trades at 19.71 times forward earnings and 2.44 times forward sales.
Constellation Brands (STZ)
52-week range: $160.63 – $244.75
Dividend yield: 1.39%
Next up on this list of coronavirus stocks, Constellation Brands is currently one of the largest multi-category alcohol suppliers in the United States. The business is primarily anchored by a portfolio of beer trademarks, including the Corona and Modelo brands.
On Jun. 30, Constellation reported solid Q1 results. For the quarter, net revenue came in at $2.03 billion, up 3% YOY. The net loss for the first quarter was also $908 million, or a loss of $4.74 per diluted share. This is compared to a net loss of $178 million, or 94 cents per diluted share, in the prior-year period. However, STZ saw non-GAAP net income of $457 million. Plus, the company generated $716 million in operating cash flow and $602 million in free cash flow, “an increase of 4% and 11%, respectively.”
All in all, this company’s beer business is booming, maintaining its multi-year record of solid growth thanks to higher-end import brands like Pacifico and Modelo Especial. For the beer business, management forecasts growth of 7% to 9% in 2022. Additionally, Constellation recently entered the hard-seltzer space with its Corona Hard Seltzer.
Lastly, STZ also increased its stock buyback outlook, planning $500 million of stock repurchases during the second quarter. Management aims to pay around $5 billion to shareholders through dividends and buybacks over the next two fiscal years.
STZ stock currently hovers around $220, up only around 1% YTD. Right now, it trades at 21.55 times forward earnings and 4.9 times forward sales. Interested readers could consider buying into the declines.
Coronavirus Stocks to Buy: Cyberark Software (CYBR)
52-week range: $95.12 – $169.70
Based in Israel, Cyberark Software provides information technology (IT) security solutions to protect data, infrastructure and assets.
This pick of the coronavirus stocks announced Q1 results back in early May. For the period, total revenue came to $113 million. The company also reported a GAAP net loss of $15.2 million (or 39 cents per diluted share), compared to a net income of $3.8 million (0r 9 cents per share) a year ago. Lastly, cash and equivalents came to $515 million. Following the results, CEO Udi Mokady remarked the following:
“We were thrilled with the faster than 40 percent growth in our Annual Recurring Revenue (ARR), greater than 250 percent growth in ARR related to SaaS and on-premises subscription contracts, the 180 percent increase in subscription revenue, and that subscription revenue represented 22 percent of total revenue for the quarter.”
All in all, this company is a market leader in the growing and highly strategic privileged-access management space. With more than 30% annual recurring revenue growth forecasted through 2022, Cyberark continues to outpace industry peers.
Right now, CYBR stock currently hovers around $141, down almost 12% YTD. However, CYBR shares have returned over 25% in the past 12 months. Back in February, Morgan Stanley also maintained an “overweight” rating on CYBR stock with a $200 price target.
Today, the stock’s forward price-to-earnings (P/E) and price-to-sales (P/S) ratios stand at 269.23 and 11.62, respectively. A further decline toward the $135 level would improve the margin of safety here.
Datadog (DDOG)
52-week range: $69.73 – $135.38
Next up is Datadog, a monitoring and analytics platform that facilitates log management, infrastructure monitoring and application performance monitoring. Basically, developers and IT operations teams rely on Datadog for consistent data insight.
Like others on this list, Datadog reported Q1 results in early May. For starters, revenue came in at $199 million, representing a 51% YOY increase. Additionally, the net loss stood at $13 million while non-GAAP net income was up 6% YOY at $20 million. Finally, cash and equivalents ended the quarter at $373 million. On the results, CEO Olivier Pomel remarked:
“Digital transformation projects are being prioritized, as the need to be digital-first and agile is more prominent than ever. We believe we are in a strong position to benefit from this trend as the most complete and cloud-native end-to-end observability platform.”
Altogether, this company has been continuously improving its product suite as well as its network of partners. On Jul. 1, Datadog announced a partnership with Salesforce (NYSE:CRM) to provide “real-time monitoring and threat detection” across its platform. It has also forged a partnership with Microsoft (NASDAQ:MSFT) Azure.
DDOG stock recently popped to around $132 and is up nearly 34% YTD. It was also able to recover from the earlier selloff in tech stocks, gaining almost 69% in the past three months. Today, this pick of the coronavirus stocks has forward P/E and P/S ratios of 729.39 and 39.84, respectively.
Coronavirus Stocks to Buy: Electronic Arts (EA)
52-week range: $110.15 – $150.30
Dividend yield: 0.36%
Based in California, Electronic Arts is one of the world’s largest video game publishers, making games for multiple consoles, PC and on mobile. This company also owns several large franchises, including the uber-popular Madden, FIFA, Battlefield, Apex Legends and Need for Speed franchises.
EA released its Q4 and fiscal-year 2021 financial results back in mid-May. For the quarter, total revenue stood at roughly $1.35 billion, down 3% YOY from 1.39 billion in the prior-year quarter. Additionally, net income came at $76 million — or 26 cents per diluted share — down 82% from $418 million (or $1.43 per shar) a year ago. Lastly, cash and equivalents ended the quarter at $5.26 billion. On the results, CEO Andrew Wilson remarked the following:
“[EA is] now accelerating in FY22, powered by expansion of our blockbuster franchises to more platforms and geographies, a deep pipeline of new content, and recent acquisitions that will be catalysts for further growth.”
Earlier in the year, this company acquired Glu Mobile for $2.1 billion in order to jump-start its struggling mobile games division. Now, the acquisition is expected to bring in over 500 developers. For the fiscal-year 2022, EA anticipates that it can reach $7.3 billion in net bookings, an 18% improvement from the previous year.
Today, EA stock sits at about $137 — a little below the price it was trading for at the start of 2021. True, this pick of the coronavirus stocks is down for the year. However, given its consistent cash cows and strong tailwinds from the gaming industry, it looks like an excellent pick at the current price. The forward P/E and P/S ratios stand at 21.9 and 5.37, respectively.
Fiverr (FVRR)
52-week range: $90.81 – $336.00
Like Cyberark, Fiverr International is also based in Israel. However, rather than dealing in IT, this company connects businesses with freelancers who offer digital services in more than 300 categories. As you might expect, this company has benefited immensely from the pandemic-fueled shift toward online work over the past year.
Fiverr reported Q1 results in early May. For starters, Fiverr’s revenue doubled YOY to $68.3 million. The company reported a non-GAAP net loss of $0.3 million, or 1 cent per diluted share. That’s compared to a loss of $2.6 million, or 8 cents per diluted share, in the prior-year quarter. Lastly, cash and equivalents ended the quarter at $183 million. On the results, CEO Micha Kaufman said the following:
“We continue to capitalize and execute on the ongoing digital transformation as we delivered one of the strongest quarters in Fiverr’s history with outstanding results across the board, supported by continued execution on our strategy.”
But that’s not all — Fiverr also just recently released its Q2 report, which beat estimates. All told, this company is finally becoming profitable, having reached a turning point where revenue is growing faster than expenses. Now, Fiverr forecasts 2021 revenue to increase between 59% and 63%, up to more than $300 million. The company also estimates that its total addressable market (TAM) is currently worth $115 billion.
Right now, FVRR stock is trading at about $175, having recently slid from the $250 level. However, shares still do not look extremely cheap, trading at 34.35 times current sales. By comparison, its closest rival, Upwork (NASDAQ:UPWK), trades at only 14.42 times current sales. Nevertheless, if the Delta variant were to lead to lockdowns as in previous months, this pick of the coronavirus stocks could easily climb again.
Coronavirus Stocks to Buy: Teladoc Health (TDOC)
52-week range: $129.74 – $308
Last up on this list of coronavirus stocks is TDOC stock. No doubt, the pandemic has helped Teladoc immensely, allowing it become one the world’s largest virtual health providers. Essentially, this company offers on-demand healthcare services, connecting members with a network of physicians and behavioral health professionals.
Teledoc released Q2 results on Jul. 27. For the quarter, revenue grew 109% YOY to $503 million, raising the 2021 revenue outlook to over $2 billion. However, this company’s net loss also came in at $133.8 million, compared to a loss of just $25.7 million in the prior-year quarter. Still, cash and equivalents ended the quarter at about $784 million. On the results, CEO Jason Gorevic noted the following:
“Teladoc Health delivered a strong second quarter, marked by exciting new client wins, product launches, and tremendous progress on our quest to be the category-defining provider of whole person virtual care.”
Over the course of the pandemic, demand for Teladoc’s convenient and fast services has skyrocketed. However, as the outbreak dwindled earlier this summer, investors were worried about the company’s prospects. As a result, TDOC stock has declined by almost 23% YTD. It currently hovers at the $153 mark, less than half of its mid-February 52-week high.
That said, though, TDOC stock could still be well-positioned to sustain its strong momentum — especially if the Delta variant affects our daily lives as significantly as the onset of the pandemic. Plus, patient visits on the platform surged 28% YOY in Q2 to 3.5 million, suggesting that Teladoc can perform well even in a post-pandemic world.
Today, this stock’s forward P/S ratio stands at nearly 11.85. Interested investors could regard a potential drop to $140 or below as a better entry point.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
