Pfizer Inc.'s (PFE) revelation on November 9th that its COVID-19 vaccine, which it developed in collaboration with German biotechnology firm BioNTech SE (BNTX), demonstrated over 90% efficacy in preventing the infection, sent technology stocks down significantly. Investors rushed into buying stocks of energy utilities, airlines, cinema companies, and hotels with the expectation that normalcy will return soon. The interim results from the Phase 3 trial raised hopes that the vaccine could become available by the end of 2020.
Tech stocks soar with COVID-19 infections
The pandemic resulted in investors picking up technology stocks as all other parts of the economy remain at a standstill. This has led to significant overbought conditions of ‘stay-at-home’ technology stocks. Year-to-date, Zoom Video Communications, Inc. (ZM) and Amazon.com, Inc.’s (AMZN) stock prices have skyrocketed 546% and 68%, respectively. In the two days following PFE’s announcement, AMZN and ZM fell as much as 5.6% and 15.5%, respectively, as some investors took profits.
However, investors soon returned to technology stocks as the world witnessed a second wave of infections. Several European nations have either gone into another lockdown or increased restrictions as the number of COVID-19 cases have surged. These countries include the U.K., Germany, Italy, Belgium, Spain, France, and the Netherlands. The new round of restrictions means there is still time before we return to normalcy.
Working, studying, or even simply staying at home is only going to increase people’s dependence on technology. This is likely to lead to a further rise in the demand for technology stocks. Paypal Holdings, Inc. (PYPL), CrowdStrike Holdings, Inc. (CRWD), and Twilio Inc. (TWLO) are three technology stocks worth considering in the current scenario. All three stocks have posted year-to-date gains in the double digits.
Paypal Holdings, Inc. (PYPL)
Online payments firm PYPL has a market cap of nearly $280 billion. It offers a digital payment platform allowing customers, vendors, and other commercial users to make payments digitally, or through mobile. PYPL gets a fee for every payment that a vendor or customer makes. The company’s offerings include Braintree, Xoom, PayPal, Venmo, and PayPal Credit.
On November 3rd, PYPL reported its results for the third quarter that ended September 2020. Its revenue grew 25% year-over-year to $5.5 billion as people continued to use online payment platforms amid the COVID-19 pandemic. The company added 15.2 million new active users to end the quarter with 361 million active users.
PYPL expects revenue growth of 20%-25% for the fourth quarter and 20%-21% in full year 2020, as the second wave of the pandemic will continue to keep people indoors. It further expects new active users to increase by 70 million in 2020.
The company’s stock has an average price target of $221.97, which reflects an upside potential of 15% from its last closing price of $192.67.
CrowdStrike Holdings, Inc. (CRWD)
CRWD is a cloud-native cybersecurity technology provider with a market cap of around $32 billion. Its services include cyberattack response, endpoint security, and threat intelligence. The work-from-home culture has led to a rise in cyber-attacks. As the second wave of the pandemic forces people to continue working from home, hackers are having a field day. Companies are turning to cybersecurity solutions providers to secure their data. This is reflected in CRWD’s stock price, which surged 190% year-to-date.
In the second quarter that ended July 2020, the company’s revenue went up 84% year-over-year to $199 million. Subscription revenue, which rose 89%, was the main growth driver as people subscribed to CRWD’s services to secure their systems while working from home. The company’s new subscription customers increased 91% to 7,230.
CRWD expects its revenue for fiscal 2021 to rise more than 50% to the range of $723.3 million to $733.5 million. Growth is expected to be driven by an increased adoption of cybersecurity solutions as people continue to stay at home.
A recent SEC filing showed that investment firm Tiger Global Management has increased its stake in CRWD by nearly 50% during the quarter that ended September 30. Tiger Global now owns more than $1 billion worth of CRWD shares. This investment supports a “Strong Buy” rating in our POWR Ratings. The stock has an “A” for Trade Grade, Peer Grade, and Buy & Hold Grade.
Twilio Inc. (TWLO)
TWLO offers cloud communications as a service. Web developers can use its cloud computing platform to integrate text messages, phone calls, and internet protocol voice communications into phone, mobile, and web apps. The company’s stock price soared more than 211% year-to-date, as companies worldwide transformed digitally amid the COVID-19 pandemic.
For the third quarter that ended September 2020, TWLO’s revenue surged 52% year-over-year to $448 million. The rise was driven by increased adoption of the company’s cloud-based applications. Active Customer Accounts rose 21% to surpass 208,000, and non-GAAP operating income totaled $7.3 million. TWLO had reported an operating loss of $3.6 million in the third quarter of 2019. The company nears breakeven as the pandemic continues to boost its revenues.
For the fourth quarter ending December 31, the company expects revenue to increase by 36%-37% to $450 million-$455 million. The second wave of the pandemic will continue to force people to work from home and use TWLO’s services for smooth operations.
With a market cap of nearly $48 billion, the internet infrastructure provider is likely to end the year on a strong note despite the modest outlook. It is no surprise that it is rated “Buy” in our POWR Ratings system. It also has an “A” for Peer Grade, a “B” for Buy & Hold Grade and Trade Grade. In the 11-stock Software – SAAS industry, it is ranked #1. With an average price target of $348.43, TWLO has an upside potential of 16.8%.
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PYPL shares were trading at $197.70 per share on Monday afternoon, up $5.03 (+2.61%). Year-to-date, PYPL has gained 82.77%, versus a 12.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Puja Tayal
Puja is a seasoned writer working with financial publishing companies like Motley Fool Canada and Market Realist. With over 13 years of experience in the field of fundamental research, she brings a blend of comprehensive, well-researched insights into her articles.3 Tech Stocks to Buy With COVID-19 Infections Soaring appeared first on StockNews.com