The tech industry’s big winners
Several tech stocks made our lives easier while lining investors’ pockets during the Covid-19 lockdown. Chris Keall reports
Anumber of listed technology companies are in the positive position where they’ve both helped make our lives better during the Covid-19 outbreak and bolstered investors’ fortunes.
For context, the Dow is down 17.01 per cent in the US for the year to date. Here, the NZX50 is down 7.44 per cent since the start of January.
Zoom Year-to-date share price gain: 154.4%
In tech, there’s a perennial debate around security vs userfriendliness. Zoom’s wild success during global lockdowns shows that in commercial terms, the latter trumps all.
Despite misleading claims over encryption, and default settings that contributed to various security blunders, Zoom became the video chat tool of choice for so many families, remote workers and even Cabinet meetings that its very name became a verb. Rivals from Google to Facebook were left flat-footed.
But although Zoom’s Nasdaqlisted shares have surged, giving it a market cap of just under US$50 billion ($84b), relatively few people have stumped up for the paid version (which allows a group meeting to last more than 40 minutes).
In its March quarter, Zoom just squeaked into the black on US$188.3m revenue (it forecasts US$199m to US$201m for the current quarter) — and now many people are heading back to the office, where the boss pays for unlimited videoconferencing.
Pushpay YTD gain: 55.9%
Oh ye of little faith. Pushpay’s NZX-listed shares, which were at $4.50 in the New Year, crashed during the early weeks of the Covid-19 crisis, troughing at $2.56 on April 17. But it turned out even though they couldn’t go to church — in fact, because they couldn’t go to church — American worshippers were using Pushpay’s digital platform more than ever for giving, and organising. And on May 5, the Auckland-based company (which has most of its business in the US and reports in USD) reported operating earnings of US$25.1m for the 12 months ended March 31 from US$1.6m a year earlier, revenue up 33 per cent at US$127.5m and gross margin widened to 65 per cent from 60 per cent. Shares rallied to $7.02 as it forecast strong revenue growth ahead. It seems a classic case of lockdowns giving a customer base little choice but to embrace a mobile app — and finding it worked better than they thought. The conversion could be long-term.
Fisher & Paykel Healthcare YTD gain: 37.8%
The Auckland-based maker of components for respirators (among other high-tech healthcare products) was already on a bull run before the outbreak, and its shares are now up 91 per cent over the past 52 weeks. That makes it easily the NZX’s most valuable company, with a market cap of $17.5b. Its performance is helping to bolster the NZX, and many of our KiwiSaver funds.
Last week, Forsyth Barr analyst Chelsea Leadbetter fretted that F&P Healthcare’s valuation was getting well ahead of its peers as its shares hit $29.48 (they closed the week at $30.50). With different countries taking different strategies through the Covid19 crisis, the future is hard to pick. Leadbetter — who is forecasting the company will make a net profit of $278.5m from revenues of $1.2b for the financial year, has a price target of $18.50 — meaning she thinks it will lose some $8b in value.
Netflix YTD gain: +32.3%
Last November, Netflix shares were being battered as investors focused on its US$10b debt mountain, and new competition from Disney+. But on April 21, Netflix reported that a record net 16 million new subscribers joined its service during the first three months of the year, taking its total subs to a new high of 183m. Netflix’s decision never to go into sports suddenly looks like genius. Ditto its choice to forgo advertising in favour of a subscriber revenue only.
With many customers already having a big backlog of content on their watch lists, the enforced break will only improve Netflix’s bottom line, and help it reduce its debt mountain.
Amazon
YTD gain: 25.4%
Worldwide lockdowns have accelerated the shift toward online buying, cloud computing and video streaming — all areas where Amazon plays. It’s surging share price has lifted its market cap to US$1.2 trillion, making it the world’s third most valuable company after Microsoft (US1.4t) and Apple (US$1.3t) and consolidating its founder Jeff Bezos’ position as the world’s richest person with a wealth of US$143b.
In March, Amazon said it would hire 100,000 workers to meet increased demand during the pandemic — but has also faced protests by some workers who say coronavirus protections are inadequate, and over the weekend a sixth Amazon warehouse worker died from Covid-19.
AFT Pharmaceuticals YTD gain: 24.3%
On March 12, AFT boss Dr Hartley Atkinson told the Herald that his company’s products were flying off the shelves. It had sold a year’s worth of its vitamin C supplement in just three days amid the coronavirus scare. And on March 31, the company formalised his upbeat comments, with a trading update that it expected operating earnings for its 2020 financial year to be at the “mid-to-upper end” of its guidance range of $18.8m to $21.8m, while it expected revenue to rise to $100m from the year-ago $85.1m. It said, the company “continues to see strong demand for a number of its products following the Covid-19 outbreak”. Products in high demand include cold and influenza medicines, hospital antibiotics and Vitamin C Liposachets. Investors will be looking for confirmation of those positive trends when AFT reports its full-year result tomorrow.
Chorus YTD gain: 16.6%
The early days of the lockdown brought our largest broadband usage spikes ever, eclipsing the 2019 Rugby World Cup. But unlike the RWC, the wheels didn’t fall off and on March 27, Chorus reaffirmed its full-year guidance for operating earnings of $640m to $655m. There is a degree of uncertainty ahead. The rules for how the market will operate after the UFB (Ultrafast Broadband) fibre rollout is finished are still being finalised, and analysts are split over the degree of threat posed by 5G fixed wireless offerings from Spark and Vodafone. But investors know
that the heavy-spending days of the fibre build will soon be behind it, allowing Chorus to lift its dividends.
Microsoft YTD gain: 14.0%
Microsoft’s initial attempts at online collaboration were not good. The early days of Sharepoint were torture. But during the various global lockdowns, it came of age. Users of its Teams product — which turns out to be great — more than doubled to 75m over March and April as demand for its cloud computing services boomed during lockdowns. And on April 29, the company reported that its quarterly sales rose 15 per cent in the first three months of the year to US$35b, and it generated a net profit of US$10.75b. Both measures topped Wall Street expectations, and were a positive contrast to other tech giants like Google (which saw cloud product usage rise but ad revenue fall sharply) and Facebook (which is even-stevens for the year). This month, Microsoft broke the surprise news that Auckland will be the location for its next regional data centre — a build that should inject $100m-plus into our economy at a time when foreign investment is scarce.
Uber YTD gain: 4.5%
The outbreak has been widely regarded as a disaster for the sharing economy. And in some cases there’s no doubt — such as privately-held Airbnb, which has seen bookings collapse (though in NZ, at least, many Airbnb properties can be returned to the rental market). But for Uber, it’s been more swings and slides.
The company this month reported a US$2.9b loss and announced plans to lay off 3700 — around 14 per cent — of its full-time employees. Meanwhile the rideshare giant’s core business was thumped during the quarter.
But investors shrugged off the paper-loss of a US$2b goodwill writedown, liked the fact that Uber offloaded its money-losing Jump e-bike and e-scooter business (bought by Lime); and appreciated that food delivery division Uber Eats grew 52 per cent during global lockdowns.
Uber shares, which troughed at US$14.82 mid-March, have recovered to US$32.79 — slightly up on the start of the year. Founder Travis Kalanick — Uber’s largest individual shareholder — continued to ignore public sentiment, buying a US$43.3m LA mansion just as thousands of Uber’s workers were getting a pink slip.