5 Internet-Based Stocks To Benefit From Coronavirus Lockdown

Rising incidences of coronavirus outside mainland China have been rattling stock markets globally. The novel coronavirus has managed to creep into countries like Italy, Israel, South Korea, Austria, Switzerland, Croatia and Iran, slowly threatening to become a global pandemic.

Although the spread of the virus seems to be slowing down in China, it is picking up pace in other parts of the world, including the United States. Notably, top U.S. health officials recently announced that the spread of coronavirus in America is likely to be inevitable and also warned that conditions could be “severe”. King County in Washington recently declared a state of emergency after recording 14 confirmed cases of infection in the county, which resulted in five deaths.

This is making people anticipate a nation-wide black swan event in the United States. Chinese citizens are already confined to their homes, as are the residents of several cities in South Korea. With growing speculations of lockdowns in various parts of the world, the use of the Internet and Internet-based entertainment and services are increasing. Moreover, entrepreneurs are rapidly coming up with ways to keep customers engaged with the Internet.

Recently, online direct sales company, JD.com Inc. (NASDAQ:JD) , forecast first-quarter 2020 revenue growth of about 10%. This indicates that online retail in China has been more resilient to the coronavirus scare than expected. Per management, daily active users and orders have picked up pace as demand for consumer goods and fresh produce remained strong throughout the epidemic.

On this note, we have picked five Internet-based services stocks that are poised to benefit significantly from the COVID-19-incited panic.

Dropbox, Inc. (NASDAQ:DBX) offers a platform that enables users to store and share files, photos, videos, songs and spreadsheets. A strong focus on product innovation and introduction of features like Dropbox Spaces, Paper and Extensions are anticipated to boost its user base. Further, integration with leading applications like Zoom Video, Slack and Atlassian will likely expand the Dropbox paying user base.

Dropbox currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Moreover, in the year-to-date period, Dropbox’s shares have gained 7.8% against the S&P 500 composite market’s 8.2% decline.

China Distance Education Holdings Limited (NYSE:DL) is a leading provider of online education in China, focusing on professional education. The courses offered by the company through its websites are designed to help professionals and other course participants obtain and maintain the skills, licenses and certifications necessary to pursue careers in China in the areas of accounting, law, healthcare, construction engineering, information technology and other industries. With the uncertainty concerning the spread of coronavirus, the number of online students is expected to increase.

China Distance Education Holdings currently sports a Zacks Rank #1. Besides, its shares have reached breakeven in the year-to-date period, while the S&P 500 composite market declined 8.2%.

Peloton Interactive (NASDAQ:PTON) creates fitness products, accessible through Peloton Bike, Peloton Tread and Peloton Digital, which provides a full slate of fitness offerings, anytime, anywhere. Per Needham analyst Laura Martin, the quick proliferation of coronavirus might prevent U.S. residents from stepping out and going to the gym, making it more likely for fitness enthusiasts to order a Peloton stationary bike and exercise at home. “This may drive higher unit sales and subscription revenue in 2020 than are currently in our estimates,” she stated recently.

Peloton currently carries a Zacks Rank #2 (Buy). Moreover, in the year-to-date period, the company’s shares have lost 1.6% compared with the S&P 500 composite market’s 8.2% decline.

Zoom Video Communications Inc. (NASDAQ:ZM) is a provider of video and web conferencing services. The company unifies cloud video conferencing, online meetings, group messaging and a software-defined video conference room solution into one platform. Notably, the stock has not faltered in the face of the coronavirus crisis, primarily because of its offerings, which are now in demand as traveling to work has been limited.

Although the stock has a Zacks Rank #3 (Hold), it is worth keeping a watch for. Moreover, in the year-to-date period, Zoom’s shares have gained 66.3% against the S&P 500 composite market’s 8.2% decline.

Haidia, China-based online entertainment service provider Iqiyi Inc. (NASDAQ:IQ) is another stock to keep a lookout for. The company offers movies, television dramas, variety shows and other video contents. Per The Paper, online searches on Chinese social media site Weibo for the word "boring" grew 626% on Jan 26 and key phrases such as "how to spend time at home when bored" also started to trend on the website. This makes us optimistic that Iqiyi is poised to benefit from this lockdown situation.

This Zacks Rank #3 company’s shares have gained 12.7% in the year-to-date-period against the S&P 500 composite’s decline of 8.2%.

Conclusion

The COVID-19 scare is expected to send several other parts of the world on a state of stay-at-home as the virus spreads across the globe. This is likely to boost most Internet-based services, as school, work, shopping and entertainment are expected to be soon taking place primarily online.

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