The coronavirus outbreak is affecting more than just human beings, as the world for the first time relooks at the justification of making one country its manufacturing hub. Chinese authorities are fighting to curb the spread of this deadly disease, cutting off transportation, closing facilities, factories and shops, and doing what is necessary to contain the number of people infected. Airlines too are abandoning flights to virus-impacted areas.
Covid-19 Cases on the Rise
Coronavirus has spread to several nations, with the worldwide death toll soaring to 3,490. The latest figures reveal that till now 102,000 people worldwide have been infected by the COVID-19 and the number is expected to rise in the upcoming time. It has also impeded global supply chains and forced countries to quarantine and shut down workshops and factories.
In China, there are more than 80,000 confirmed cases, with more than 44,000 people having recovered while around 2,900 have expired. In the United States, approximately six deaths due to Coronavirus have increased fears of a broader epidemic. COVID-19 is caused by a Coronavirus family member, SARS-CoV-2 that has never been confronted in the past. What makes the situation worse is that there is still no cure for this disease. Till the time the drug makers find an antidote or a vaccine, the health officials have no other option but to issue restraint orders by curbing overseas travel, especially to Japan, Italy, Iran and South Korea.
In fact, many big tech giants such as Twitter, Hewlett Packard Enterprise and many more companies have requested workers and staff to work from home and cancelled events or closed offices due to the risk of this infection.
Top 3 Tech Stocks for the Long-Term Amidst the Coronavirus Outbreak
The coronavirus epidemic that has emerged from China is battering the technology stocks. Several tech companies, including Apple, Microsoft, and HP, have already cautioned investors that the impact from Coronavirus could dent their businesses.
Regardless of the fear and anxiety caused by the coronavirus outbreak, tech investors should take a long-term view. The Tech sector’s ability to bounce back can be assigned to the immense long-term growth prospects of technology stocks. Continuous infusion of AI and machine learning technologies, digital transformation and rapid implementation of cloud computing have been the major growth drivers for the technology stocks.
The enhanced use of 5G technology, the next-generation wireless revolution, is expected to stimulate additional demand. Furthermore, autonomous vehicles, blockchain, AR/VR and wearables are also expected to fuel growth in the longer term.
Coming to the semiconductor industry, which is a major part of the technology sector, it is anticipated that it will make a turnaround this year. According to an industry forecast, worldwide semiconductor sales on a yearly basis are projected to see an increase of 5.9% in 2020 and 6.3% in 2021. It is to be noted that in the last year the global semiconductor sales dropped 12.8%.
Additionally, technology companies are cash-rich, which offers support to enterprises to remain afloat amid unfavourable business atmosphere.
Therefore, considering the above-mentioned factors, we can take into account technology stocks which have survived the Coronavirus impact and exhibit robust fundamentals. These stocks have higher chances to rise in the future once the effect of Coronavirus becomes muted.
Here are the three technology stocks that appear to be resilient in the current environment:
NEXTDC Limited (ASX: NXT)
Nextdc Limited (ASX: NXT) is one of Asia's most innovative Data Centre-as-a-Service supplier, which is involved in the development and operation of independent data centres in Australia. NEXTDC is a tech-savvy company proposing critical power, security and connectivity to the digital economy.
On 4 March 2020, the company stated that its agreement at its Victorian data centre services now stands at 21MW, up from the previous figure of 15MW as on 31 December 2019. Post addition of the contracted expansion options, the signed commitments are now more than 28MW.
Following the new announcement, NXT remains on track to bring forward the fourth stage of construction at M2 to deliver at least 12MW of incremental capacity. Therefore, for FY20, the company has upgraded its previous capex guidance of $280 million to $300 million to between $320 million to $340 million.
During 1HFY20, the revenue of the company went up by 8% to $97.7 million, and underlying EBITDA witnessed an increase of 21% to $50.9 million. Customer numbers for the period were up 174 or 16% to 1,264. Operating cash flow during the period stood at $20.1 million, up 34% year over year.
On 10 March 2020, the NXT stock was trading at $7.87 (AEDT 12:04 PM), down by 2.114% from its previous close. With almost 345.39 million shares outstanding, the company’s market capitalisation stood at nearly $2.78 billion.
WiseTech Global Limited (ASX: WTC)
WiseTech Global Limited provides solutions to the worldwide logistics industry. The company recently announced its 1HFY20 results for the half-year ended 31 December 2019, wherein it reported revenues of $205.9 million, an increase of 31% year over year. Gross profit for the period came in at $169.4 million, up 31% year over year, whereas net profit after tax increased by 160% to $59.9 million.
Operating profit for the period came in at $42 million, up 17% year over year, whereas NPATA increased 22% year over year and stood at $33.5 million. Earnings per share for the period stood at 18.8 cents per share, up a whopping 147% year over year.
Outlook: The company foresees early 2020 revival from the end of 2019 trade volume softness within the logistics industry despite the coronavirus outbreak. Nevertheless, ~16% of the worldwide GDP is provided by China, and the outbreak of the Coronavirus is unfavourably affecting manufacturing facilities, creating restrictions on the supply chain as well as on trading activities across the globe.
It is to be mentioned that the company has delivered robust progress in 1HFY20 across its business operations and technologies, which is expected to create long-term shareholders’ value, going forward. For FY20, WTC expects revenue to be in the range of $420m - $450m, depicting a growth of 21% - 29%. EBITDA is expected to be within the ambit of $114m - $132m, signifying a rise of 5% - 22%.
On 10 March 2020, the WTC stock was trading at $13.98 (AEDT 12:04 PM), up by 3.709% from its previous close. With almost 318.31 million shares outstanding, the company’s market capitalisation stood at nearly $4.29 billion.
Afterpay Limited (ASX: APT)
Afterpay Limited is engaged in providing technology-driven payments solutions for consumers and businesses through its Afterpay and Pay Now services. The company recently announced its 1H FY2020 results for the period ended 31 December 2019. APT’s total income for the period stood at $220.3 million, up 96% year over year. The company’s loss after tax declined 42% on a year over year basis.
In 1HFY20, the company’s underlying sales from ANZ, the US and the UK stood at $3.1 billion, $1.4 billion and $0.2 billion respectively. Underlying total sales during the period stood at $4.8 billion, up 109% year over year.
For FY20, the company expects to attain 9.5 million active customers. Furthermore, it expects to surpass its mid-term target of approximately more than $20 billion of underlying sales by the end of FY22.
On 10 March 2020, the APT stock was trading at $29.30 (AEDT 12:04 PM), up by 6.044% from its previous close. With almost 264.6 million shares outstanding, the company’s market capitalisation stood at nearly $7.31 billion.
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