Finally recovering from the negative impacts of Covid-19, for the most part, economies have reopened. And it seems that the majority of Americans have gone back to living much as they did before anyone heard the term “Covid-19.” We’re reaching a “new normal,” one that is vaguely the same as two years ago, but with the added caution of Covid always lurking down the hall. It’s had interesting impacts on the market, with clear winners and clear losers. However, I think that some Covid stocks can thrive in this new normal, especially as we begin to shed the pandemic term from our daily life.
That’s because, even though life in the Western world in general will largely revert back to the way it was in 2019, some habits have changed for good. For example, e-commerce, working from home, ordering takeout, buying homes, and housing renovations, experienced massive demand during the pandemic. And that’s not likely to change when it ends.
That doesn’t mean that all of these lockdown trends will remain as intense as they were in 2020. Indeed, especially for the next several months, we’ll likely see continued pent-up demand for eating out, traveling and shopping in stores, which will eventually boost Covid stocks.
However , after the reopening euphoria fades, likely by the end of next summer, I think the lockdown trends will make a big comeback. That resurgence will enable some of the Covid stocks to make a big comeback.
Let’s look at some names that could see a big bump when we see which pandemic habits will stick:
Covid Stocks That Will Thrive: Amazon.com (AMZN)
Amazon was one of the greatest success stories during the pandemic. With people locked inside, Amazon presented one of the safest and easiest ways for people around the world to order goods, groceries and sanitary supplies. And that’s not like to end anytime soon. The e-commerce juggernaut should benefit from the increased attraction to both e-commerce and working from home.
Insider Intelligence expects global retail e-commerce spending to increase nearly 14% in 2021. In the U.S., the firm predicts “retail ecommerce sales will grow 13.7%, reaching $908.73 billion in 2021.” It noted that, “Prior to the pandemic, we expected sales would grow just 12.8%.”
Since I expect U.S. and global e-commerce sales to jump meaningfully again after the reopening euphoria eases, I believe that the firm’s 2021 and 2022 retail e-commerce estimates will actually prove to be quite conservative.
Consequently, I expect Amazon’s e-commerce sales growth to accelerate meaningfully throughout the rest of 2021, which should consequently boost AMZN stock.
Another benefit for Amazon in post-pandemic habits is its cloud unit. Yahoo Finance recently stated, “…cloud computing and storage have found applications in social networking, messaging apps and streaming services. It has empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. Cloud computing is also supporting organizations in remotely processing a lot of information, developing and running key applications and services.”
Most people agree work from home and online learning are here to stay to a certain extent. To what extent is what remains to be seen. But all of the activities that Yahoo Finance named should remain much more popular than they were before the pandemic. As a result, Amazon’s cloud unit should continue to grow rapidly.
As I noted in a Sept. 9 column, the Street appeared to be disappointed by Roku’s paltry 1.5 million user base increase in in Q2 versus Q1. Investors were also less-than-thrilled about Roku’s weak revenue, gross profit and operating income in Q2 compared to Q1.
But again, as I’ve mentioned, pent-up demand brought about by the pandemic should ease in the second half of 2022. As a result, tens of millions of consumers should return to their new habit of staying inside. As it turns out, when you have access to most media through the comfort of your own home, it presents a tough case to leave.
The new tendency for people across the world to stream via their TV should greatly boost ROKU stock. Another InvestorPlace contributor,
Covid Stocks That Will Thrive: Pool Corp (POOL)
With Americans spending much more time and money in and on their homes over the last year, POOL stock has jumped 35% over the past year.
As Investor’s Business Daily pointed out in an Aug. 30 article, the distributor of materials used to make and maintain pools has many positive catalysts.
Amid the trend of spending more time at home, “Some 110,000 in-ground pools are expected to be built this year, up 40% from pre-Covid,” Investor’s Business Daily stated.
But the website added that, before the financial crisis, about 170,000 in-ground pools used to be built annually. However, I expect this to return to normal, or even greater, as Americans continue their spending spree on their homes. This shows especially in Pool Corp’s business.
In July, Pool Corp reported that pool contractors are already “booked into” next year. They are benefiting particularly from strong demand for new homes and increasing popularity in the southern U.S., Investor’s Business Daily added.
Despite all of these positive drivers, POOL stock is only changing hands for 30x forward earnings estimates for 2022.
Domino’s Pizza (DPZ)
Without a doubt, Americans have become much more used to eating takeout and delivery fare in the past two years than they have before. Although that trend is likely to ease for the next several months, it will probably remain much stronger than in 2019 and should strengthen again in mid-2022.
Domino’s has already greatly benefited from the trend, In 2020, the company’s EPS jumped over 20%. Analysts, on average, expect its EPS to climb another 13.6% this year and 15% in 2022. But I would not be surprised to see the company beat both of those numbers.
Also encouragingly for DPZ stock, the company’s management showed confidence in its outlook by approving a $1 billion stock buyback initiative in July. Meanwhile, Bill Ackman’s hedge fund, Pershing Square (NYSE:PSTH) held over 2 million shares of the stock at the end of Q2.
On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.