The Coronavirus Has Forced Us into a Tech Reliant World
MBA, CSPO, former professional trader for Goldman Sachs and founder of OptionStrategiesInsider.com
Right now, many Americans are facing difficult times, with more than 33 million people filing for unemployment over the last eight weeks, the US economy is feeling the pressure.
We are currently in one of the most difficult economic periods we have ever faced. What’s baffling most people is why the stock market is up almost 30% since March lows. How could that be with the economy shut down due to the coronavirus, oil reaching negative prices, and with so many people out of a job?
And that’s not even taking into consideration the possible renewed trade war between the US and China…
If you have concerns about putting your money back to work in the market, I don’t blame you. Fortunately, there is also a lot of opportunities out there if you know where to look. Companies that are not only following the market momentum but are also set to benefit from the ongoing coronavirus difficulties that we all face.
The Big Shift into Tech
As a coronavirus worked its way around the world, a new reality after the pandemic has become the norm. The trends that were already in motion have been sped up dramatically, giving people no choice but to rely on modern-day cutting-edge technology to survive.
For those who have been following the markets, the tech-heavy NASDAQ composite index has been outpacing the S&P 500 index, as well as the Dow Jones industrial average since March 23 lows. That’s no accident.
The coronavirus has changed how we do things. Some companies are feeling the wrath of change while other companies are relishing in the new tech-driven economy.
Let’s take a closer…
The Amazon Affect
It’s no secret that Amazon (AMZN) was a favorite among many families before the pandemic. The ability to order nearly everything from the comfort of your own home and have it delivered directly to your doorstep in one or two days has been disrupting the shopping industry for decades. However, now, by being forced to stay inside, there is no choice when it comes to acquiring necessities.
If we ever needed a kick in the butt to try Amazon Fresh, Amazons food delivery service, there would never be a better time. The advantages are pretty clear, not only do we get to avoid coming in contact with people who might be infected, but we also get to skip those long lines at the register.
It seems like we weren’t the only ones to notice as Amazon the selling out of food quite rapidly.
The technology giant was trading at a high of $2180 before the pandemic started. However, after a temporary setback to the market selloff in March, it exploded back up to a new all-time high $2475. And why not it had first-quarter revenue totaling $75.45 billion, blowing past the estimate of $73.69 billion.
Should we have known when the company was scrambling to hire 175,000 new workers?
Amazon has so much demand, its famous prime day, originally scheduled to happen in July, has been postponed because it doesn’t think he can handle the demand.
A New Way to Work and Play
With a shelter in place order in the works, how are kids going to attend school and parents work? Another company that became an instant winner right out of the gate Zoom Video Communications (ZM).
Most of us likely never heard of Zoom Video Communications before the pandemic, but you’d be hard-pressed to find someone now who doesn’t have someone in their household using the remote classroom and work platform.
Both the kids in my household are using it as a remote classroom, while my friends and I used it to talk smack to each other during our online poker games.
According to Zoom, they saw a 50% increase in business by the first week of April. They are now hosting more than 300 million daily meetings for its users.
Easy Collaboration Advancements
With more people working from home, tools that make collaboration easy among colleagues is a must. This is where Slack Technologies (WORK) can thrive.
Slack’s enabled users to get only information that was relevant only to them, which dramatically speeds up communication and efficiency.
The company’s chief executive, Stewart Butterfield, stated the company had 7000 new users in the first quarter, then just one week later added another 2000 users.
Butterfield added that existing customers are expanding their usage and more “Enterprise deals are getting done. More new teams are signing up. More upgrading to paid plans.”
Do people and companies want better collaboration tools… You bet!
The Giants Gets Bigger
All the companies growing in today’s environment need new technology to expand their business, this means they also need an increase in storage in a higher demand for data. Someone has to supply that.
Video companies need to store their shows, supply chains require a place to keep up with their inventory, and everyone wants to keep a database on their customers and their past purchases.
This is precisely what the companies building the cloud supply. Push button storage is what companies need to build out their data infrastructure without having to continually be reinvesting in additional servers. This is where companies like Microsoft, Amazon, and Alphabet take the reins.
Cloud service enables companies to concentrate on what they do best instead of putting time, money, and people into maintaining their data.
Microsoft has stated that they saw a growth of 59% just due to the coronavirus. Amazon Web Services also reported that revenue rose by 33%, while Google Cloud saw sales growth of 52%.
Microsoft also has a similar story to Slack when it comes to their Team collaboration service. According to the technology giant, Microsoft said it had a 775% jump in demand in Italy. Overall it added as many users in a week as Slack has added since our inception.
Technology is Quickly Changing the Way We Live
All of these changes are happening in front of us right now. You can let them pass you by, or you can jump on board and profit along with the new economy.
There are many potential winners out there, so far, I’ve only touched the tip of the iceberg. Companies like Smartsheet (SMAR), sells affordable productivity tools, or BlackLine (BL), which provides automated accounting software, or Chewy (CHWY), that allows pet owners to order pet supplies online, just to name a few.
With so many people being forced into a new reality, those who would typically be laggards to adopt new technology are now being forced to expedite their path to innovate, thus causing a dramatic surge in the technology sector.
Don’t get me wrong, price still matters, so investors need to walk a tightrope between growth and attractive capital gains. Going forward, our lives will be more technology-driven, and the stock market is going to reflect that. For those looking to step in and benefit from the new reality, the best advice I can give you would be to look at applying the right option strategies
to the stocks that are reflecting the technology demand of the new economy. The trends we see playing out today represent the vision of the world to come.
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