Are Amazon, Tesla, and Alibaba the growth stocks in a slower economic growth world?

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Are Amazon, Tesla, and Alibaba the growth stocks in a slower economic growth world?

 Are Amazon, Tesla, and Alibaba the growth stocks in a slower economic growth world?

Summary

  • Worldwide, coronavirus swallowed the growth made by numerous economies through various industry verticals in the past.
  • Technology trends such as online marketplace, digital marketing platforms, cybersecurity, cloud computing, cashless transactions and virtual conferencing applications have played an instrumental role in keeping the society, as well as businesses functional.
  • Amazon, Tesla, and Alibaba are the growth stocks in a slower economic growth world that are leveraging an array of opportunities to flourish in the crisis, with their unique and innovative offerings, recognised brand power and business development strategies.
  • While Amazon and Alibaba are capitalising on the soared e-commerce sales, Tesla is likely to make its electric vehicles (EVs) completely autonomous by the end of 2020.

The impact of COVID-19 pandemic on the stock market is one such black swan event that caught nearly everybody by surprise, and has possibly impacted the businesses across several sectors

Globally, coronavirus swallowed the growth made by numerous economies through various industry verticals in the past. Moreover, economies around the world contracted and noted shrunken GDP as well.

While the US GDP noted a contraction of 9.1%, UK and India experienced a steep fall of 21.7% and 23.9% during the period of April to June.

New Zealand’s GDP also plunged by 12.2%, recording the largest quarterly GDP decline, as per Stats NZ.

Furthermore, as per the figures reported by Australian Bureau of Statistics (ABS), Australia experienced the biggest GDP fall of 7% during the period of April to June, a steepest fall since 1959 when Australia began recording its figures.

Also, read; Australia in recession for the first time in Three Decades; Are There Any Emerging Green Shoots?

Are there any businesses flourishing in this current scenario?

Amid the turmoil, sectors like technology and healthcare coped rationally, noting exploration of a number of opportunities. During this critical period, technology played at the front foot and aided other businesses.

Owing to COVID-19 induced shutdown, people stayed confined within the four walls of the their respective abodes and most of the employees worked from home, which boosted the demand for an online marketplace, digital marketing platforms, cybersecurity, cloud computing, cashless transactions, and virtual conferencing applications.

Must read; Scoop the Stock Soup: FAANG, Tesla

There are numerous growth stocks such as Facebook, Amazon, Netflix, Tesla, Alibaba, and the list is long, that have been riding on the wave of opportunities and swaying the market with their unique and innovative offerings and recognised brand power.

These growth stocks have been playing an instrumental role in developing video streaming, online search, autonomous vehicles, digital marketplace, cloud computing and social networking.

Moreover, they are topping the market with inflated user base, top-line growth and business development strategy.

What could be the other potential reason for growth in the businesses?

As growth stocks usually reinvest their earnings with an intention to ramp up growth in the short term, they also inject capital for expansion of the business.

Low interest rates and capital injection fuelling business growth

To counter the negative impact of the COVID-19 pandemic on the economy, banks are floating money, making availability of capital at a cheap price. Moreover, low-interest rates are also impacting the ability of growth in a business.

Firms prefer locking in a lower interest rate as it makes the cost of borrowing cheaper and helps them balance their debt load and advance the ability to take on more credit to finance investments and enlarged spending.

Amid low-interest rate and deep pool of capital availability, companies are investing money in their businesses to expand the product offerings and inflate their client base.

A quick read; ‘DE’fensive and ‘OF’fensive: Pivoting Strategies for FAANG Stocks set for Action

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Let us quickly skim through the three growth stocks - Amazon, Tesla, and Alibaba.

Amazon.com, Inc (NASDAQ:AMZN)

Amazon, Jeff Bezos-led juggernaut, is expanding its workforce to aid the soared online shopping and hiring 100,000 new employees across its operations network throughout Canada and the US. Amazon also has 33,000 open corporate and technology roles assisting businesses like operations technology, AWS (Amazon Web Services), Prime Video and Alexa.

During the quarter ended 30 June 2020 (Q2 FY20), Amazon’s net sales soared by 40% (on pcp) and were recorded at US$88.9 billion.

On the Q3 FY20 earnings guidance front, Amazon anticipates net sales in the range of US$87 - US$93 billion, and operating income to strike amid US$2 - US$5 billion.

Did you read; FAANGs Defining Resilience Amid Market Downtrends

Tesla Inc (NASDAQ:TSLA)

As per various media reports, the electric car manufacturer, Tesla would be leveraging technology to make its vehicles develop the ability of full self-driving. The Company is likely to make its electric vehicles (EVs) completely autonomous by the end of 2020.

Tesla also plans to build three factories on three continents concurrently later in 2020.

During the quarter ended 30 June 2020, Tesla’s total revenue stood at US$6,036 million, and positive free cash flow was noted at US$418 million, recording positive quarterly earnings that were fourth in-a-row.

A 1 min read; Tesla Surpasses Toyota, Becomes the Most Valuable Global Car Maker

Alibaba Group Holding Limited (NYSE:BABA)

Alibaba, a technology conglomerate offering businesses such as e-commerce, food delivery, cloud computing, entertainment, and travel, is also experiencing explosive growth in its e-commerce sales.

Alibaba is also catching up in public cloud market as it announced the addition of the Vertica analytics platform and Temenos banking software to its public cloud offering, on 17 September 2020.

Moreover, Alibaba unveiled its cloud intelligence-powered manufacturing Xunxi Digital Factory, offering SMEs a digitalised end-to-end manufacturing supply chain, facilitating fully small-batch customisation and agility in production.

During the quarter ended 30 June 2020, Alibaba noted growing revenue and adjusted EBITDA (y-o-y) by 34% and 30%, respectively.

Alibaba’s robust growth in profit and cash flow has empowered the Company to continue to boost its core business and further invest for long-term growth.

A quick read; Dip for Chinese Tech Stocks – Do not Forget to Look at the 5 Tech-Related Trends

Stock performance of the companies discussed above, as on 17 September 2020:

In a nutshell, Amazon, Tesla, and Alibaba are the growth stocks in a slower economic growth world that are leveraging an array of opportunities to flourish in the crisis, with their unique and innovative offerings, and business development strategies.

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