Once upon a time, when the Internet was just getting started, futurists envisioned a future in which we no longer needed to leave our houses. Our shopping, our jobs, virtually every part of our lives would be, well, virtual. Fast forward about 25 years or so and we're still occasionally leaving the house...at least we were, until recently. With COVID-19 coronavirus doing a number on most every American institution—and most of them overseas as well—people are increasingly embracing the “stay at home” model. That in turn led to recent recommendations from JPMorgan, who had several stocks in mind to embrace this new paradigm.
Staying at Home: The New Market Leader?
JPMorgan put its analyst weight behind several such stocks, calling Amazon NASDAQ: AMZN and Facebook NASDAQ: FB their best stock picks in this current market. It also raised both share price and revenue estimates for Amazon, and did likewise for Netflix NASDAQ: NFLX.
That's just for starters: several other stocks got highlighted as part of a recent analyst note from JPMorgan, including pet shop brand Chewy NYSE: CHWY, education tech brand Chegg NYSE: CHGG, the world leader in online garage sales eBay NASDAQ: EBAY, home exercise equipment maker Peloton NASDAQ: PTON, and online music provider Spotify NYSE: SPOT.
The JP Morgan note also delivered bad news for companies requiring customers to leave the house. This includes ride-sharing operations Uber NYSE: UBER and Lyft NASDAQ: LYFT, as well as online travel companies Booking Holdings NASDAQ: BKNG and Expedia NASDAQ: EXPE. All four of these, and others, had their estimates cut going forward.
Amazon is clearly leading the way as a stay-at-home giant; recently announcing that its delivery times would likely be increasing under the weight of positively staggering volumes, the company's value has fallen just 16% since its peak back in late February. By way of comparison, the entire S&P 500 is down just over 29%.
While under ordinary circumstances, just being down less than the rest of the market wouldn't be a call to buy, MKM Partners' chief market technician JC O'Hara noted that Amazon has “positive price action” to its credit. Looking at Amazon's charts showed the stock up 9% in just under a week. The company also recovered well once it hit a key support point in $1,550
Not Just Shopping, Either.
Other analysts are getting behind the stay-at-home model. Tocqueville Asset Management portfolio manager John Petrides rattled off a laundry list of potential winners in this space, including the streaming video platforms, the entire e-sports market, and several others that allow for some semblance of the old lifestyle will gain substantially.
Meanwhile, companies that are more physically connected will need to adapt accordingly. While it's clear that grocery stores are still physical-heavy, they may not need to be much longer. Several alternatives already exist, and can be put to work with a little help from reduced government regulations. Thankfully, “reduced government regulations” have been something of a theme in the last few years.
A Brave New World Where You Don't Leave the House?
Several major alternatives are already in play for the stay-at-home world. There's a dizzying potential for flying drones to deliver packages, if the Federal Aviation Administration (FAA) would get out of its own way and actually let them be used. There have been some advances on that front, especially for restaurants. Imagine a world where your Olive Garden order gets loaded into the insulated pouch of a quad-rotor drone and arrives at your door in 15 minutes. It's been done in some places; 7-Eleven outlets were doing it years ago with short-range trips. Meanwhile, the growing self-driving car concept makes perfect sense as an autonomous delivery platform for groceries, clothiers, and even furniture makers.
However, there's one major impediment to this concept: the so-called “digital divide”. While high-speed internet—even into the gigabit range and beyond—is taken for granted in many places, many others don't have anywhere close to that. While today, those customers can get in their cars and drive to locations that have what they want, a society without universal high-speed internet access falters when no one can leave the house.
This is improving with better wireless access, but even 4G LTE access isn't always unlimited. Just ask anyone who's seen throttling. To make such a connected society happen, we need to connect all of society. To do anything less is to completely abandon a market, and to really make this paradigm happen, we need every market possible in and shopping.
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