The Biggest Pandemic Winners & Losers

There isn’t a single corner of Wall Street that was left untouched in the COVID-19 pandemic.

Initially, investors threw the baby out with the bathwater as the coronavirus spread around the world and global economies closed their doors. But, as the dust settled, investors took advantage of the stay-at-home orders and isolation period to research and uncover the true winners and losers of the global COVID-19 pandemic.

The reality is that several industries were already well-positioned to profit in the “new normal,” while other businesses took it on the chin. Let’s consider the three biggest winners and losers.

The Winners

1. Online Retailers: As storefronts closed during the pandemic, consumers quickly turned to online options to order basic necessities—and much more. In April, online retail sales increased 8.4%[1], while online orders during May rose 9%.[2]

Now, Walmart, Inc. (WMT) kept its doors open during the pandemic, though it had limited shopping hours and restricted the number of visitors in a store at any one time. But the retail behemoth saw a massive surge from its online grocery app. In fact, monthly downloads of this app jumped 190% in March.[3]

Not too surprising, Walmart released blowout first-quarter results. E-commerce sales in the U.S. soared 74%, while total revenue increased 8.6% to $134.62 billion during the quarter. The company also noted that e-commerce sales at Sam’s Club jumped 40%.[4]

Of course, you can’t have a conversation about online retailers without mentioning Amazon.com, Inc. (AMZN). As we discussed in the “Amazon: Beyond the Headlines” article on May 22, the company took steps to meet rising consumer demands, increasing capacity to deliver groceries and hiring 175,000 more employees in the U.S.

Amazon’s first-quarter sales rose 26% year-over-year to $75.5 billion, with Amazon Web Services (AWS) accounting for $10.22 billion. Looking to the second quarter, Amazon expects total sales between $75 billion and $81 billion, or 18% to 28% annual revenue growth.[5]

With many states and businesses now reopening their doors, overall retail sales have started to bounce back. May retail sales jumped 17.7%, crushing economists’ expectations for an 8.4% rise. So, now the question is will online retailers continue to dominate as the economy reopens?

2. Online Communication Platforms: The ability to work from home quickly changed from being a nice job perk to a necessity during the pandemic. To adapt to the new working environment, many companies, as well as secondary schools and universities, turned to online platforms to maintain communications and track workloads.

Zoom Video Communications, Inc. (ZM) quickly rose in popularity, as the Brady Bunch-esque group chats allowed coworkers, friends and families to stay connected. As a result, Zoom’s first-quarter revenue soared 169% year-over-year to $328.2 million. And second-quarter revenue is forecast to increase 240% to 243%.[6]

Another company that stepped into the spotlight was Microsoft Corporation (MSFT) with its remote teamwork platform, Microsoft Teams. As a result, the company’s commercial cloud revenue increased 39% year-over-year to $13.3 billion in its third quarter in fiscal year 2020.[7]

As we discussed in the June 13 “The Shift to a Gig Economy?” article, a more remote workforce could continue to drive demand for Zoom’s and Microsoft’s communication platforms.

3. Biopharmaceutical Companies: Did you know that there are more than 115 treatments, as well as more than 55 vaccines, currently being developed for the coronavirus and COVID-19?[8] Certainly, positive clinical trials and effective treatments could be a boon for biopharmaceutical companies.

Case in point: In mid-May, Moderna, Inc. (MRNA) unveiled promising early-stage data from its Phase I clinical trial of MRNA-1273, the company’s vaccine candidate. The early results showed a positive immune response to the vaccine.[9] As a result, MRNA shares have soared 240%[1] year-to-date.

Interestingly, the big-name, British biopharmaceutical company, AstraZeneca PLC (AZN) is also directly in line to profit from Moderna’s vaccine success. Back in 2013, when hardly anyone even knew the name Moderna, AstraZeneca invested in the company. Another investment in 2016 gives AstraZeneca a 7.7% stake in Moderna.[10]

AstraZeneca is also partnering with Oxford University to develop of a coronavirus vaccine.[11] Human clinical trials have started, and AstraZeneca recently announced that it will provide at least 400 million doses of the vaccine later this year.[12] AZN has climbed 39%[2] from its mid-March lows.

Several other companies, including Gilead Sciences, Inc. (GILD), Amgen, Inc. (AMGN), Pfizer, Inc. (PFE), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Roche Holdings AG (ROG) and Sanofi (SNY), are also developing vaccines and treatments for the coronavirus and COVID-19.[13] It will be interesting to see which companies are first to market.

The Losers

1. Airlines: Global travel screeched as the coronavirus pandemic emerged. Countries closed their borders to foreign visitors and ordered residents to stay at home to limit the spread of the disease.

As result, airports were plagued with grounded airplanes and empty terminals. In mid-April, the TSA reported less than 100,000 daily travelers.[14]

As travel restrictions have eased in recent weeks, more and more Americans are turning back to the friendly skies. The TSA revealed that more than 500,000 people passed through security checkpoints on Thursday, June 11.[15] However, the damage has been done and most airlines are reeling in the wake of the pandemic.

Delta Air Lines, Inc. (DAL) posted a $422 million loss for the first quarter.[16] American Airlines Group, Inc. (AAL) revealed a first-quarter loss of $2.2 billion.[17] Southwest Airlines Co. (LUV) slashed flying capacity by 60% and its second-quarter earnings dropped by $94 million.[18] And United Airlines Holdings, Inc. (UAL) reported a $1.7 billion loss for the first quarter.

Clearly, airlines have a massive hole to dig out of in the upcoming months.

2. Travel & Leisure: Aside from airlines, the travel industry overall looks completely different today than before the start of the pandemic. Cruise ships have been docked. Theme parks have temporarily locked their gates. Hotels and resorts have limited capacity and services available.

According to STR, a hospitality data analytics provider, hotel profits plunged nearly 117% in April. Luxury hotel properties were hit the hardest with a 124.5% decline in profits.[19]

Many hotels are reopening their doors with the summer vacation season heating up. But, with restrictions on occupancy, pool closures, fitness center limitations and few luxury services like spas available, it may be a long, uphill climb before hotels and resorts are at full capacity again.

3. Small Businesses: Unfortunately, many of America’s small businesses will never reopen their doors after the pandemic subsides.

A recent study from the Stanford Institute for Economic Policy Research (SIEPR) revealed that the number of active businesses owners in the U.S. dropped by 22% between February and April. That was the biggest decline on record.[20]

With businesses shuttered during the pandemic, many business owners were unable to make rent payments, which is setting them back even further once doors are reopened. In fact, the Brooklyn Chamber of Commerce recently noted that 46% of businesses didn’t pay rent in May and 87% of bars and restaurants struggled to make their rent payments.[21]

Many small businesses are hoping the CARES Act will provide some relief, but the reality is that it may be too little, too late.

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[1] https://finance.yahoo.com/news/coroanvirus-covid-april-2020-retail-sales-165105238.html

[2] https://finance.yahoo.com/news/coroanvirus-covid-may-2020-retail-sales-171911895.html

[3] https://fortune.com/2020/04/20/coronavirus-retail-industry-ecommerce-online-shopping-brick-and-mortar-covid-19/

[4] https://www.cnbc.com/2020/05/19/walmart-wmt-earnings-q1-2021.html

[5] https://ir.aboutamazon.com/news-release/news-release-details/2020/Amazoncom-Announces-First-Quarter/default.aspx

[6] https://investors.zoom.us/news-releases/news-release-details/zoom-reports-first-quarter-results-fiscal-year-2021

[7] https://www.microsoft.com/en-us/Investor/earnings/FY-2020-Q3/press-release-webcast

[8] https://fortune.com/2020/05/21/coronavirus-health-care-hospitals-doctors-insurance-companies-drug-pharma-covid-19-winners-losers/

[9] https://fortune.com/2020/05/18/moderna-coronavirus-vaccine-covid-19-trial-data/

[10] https://www.marketwatch.com/story/astrazeneca-made-a-bet-on-moderna-back-in-2013-heres-what-its-worth-now-2020-05-20