December 23, 2020
While the pandemic has made many of us reflect upon the bad things that occurred during 2020, many companies helped us get through these rough times. As a result, they have benefitted from increased demand for their products/services or shareholder interest. While the single largest driver of earnings or stock price appreciation has been the COVID-19 pandemic – which increased demand for food delivery, videoconferencing, remote learning, online shopping, home entertainment, and more – there were other factors at play.
Here are some of the winners from the major trends of 2020.
Food/Grocery Delivery Services
Going to the grocery store was not always easy for us this year. Many supermarkets limited the number of customers that could be in the store. Other times, we desperately wanted out-of-stock items or those where limited quantities could be purchased. As a result, food prep and delivery services experienced a significant increase in demand. This was good news for the major players that include HelloFresh SE (Tii:HLFFF), DoorDash, Inc. (Tii:DASH), Grubhub Inc. (Tii:GRUB) and Uber Technologies, Inc. (Tii:UBER), the parent of UberEats, and Yum! Brands, Inc. (Tii:YUM), the company behind Pizza Hut.
But even before 2020, this segment was heating up. According to IBISWorld, online grocery sales grew at an estimated annualized rate of 24.1% to reach $27 billion over the last five years. Further, the global market research provider expects revenue to increase by 72.7% in 2020 alone as consumers opt for contactless delivery. The global numbers are even more impressive, with a Business Wire report valuing the worldwide online food industry at $111.32 billion and predicting it to reach $154.34 billion in 2023.
Many schools shut down during the spring to help stop the novel coronavirus spread and keep families safe. Research and Markets, a worldwide market research provider for over 800 industries, predicted the global online education industry to continue to grow and reach $499.1 billion by year-end as most schools transitioned to e-learning and adopt e-learning technologies during the COVID-19 pandemic.
Seeking ways to teach children in their homes, school districts turned to e-learning programs, such as Perdoceo Education Corp. (Tii:PRDO), which reported that revenue increased by 9.1% to $169.1 million for its third quarter ended September 30, 2020. Other beneficiaries of the growing e-learning trend include Chegg, Inc. (Tii:CHGG), Stride, Inc. (Tii:LRN), and American Public Education, Inc. (Tii:APEI).
With both remote learning and working in play for most of the year, it’s not surprising that videoconferencing traffic has skyrocketed. The industry leader, Zoom Video Communications, Inc. (Tii:ZM), reported that strong demand resulted in total revenue for its fiscal third quarter ended October 31 rising 367% year-over-year to $777.2 million.
Other winners of the rise in video conferencing include Cisco Systems Inc. (Tii:CSCO), which acquired Webex, a provider of on-demand collaboration applications, in 2007 for $3.2 billion. Since then, Cisco developed a comprehensive collaboration environment, complete with meetings, file sharing, and videoconferencing capability. Unsurprisingly, Microsoft Corp. (Tii:MSFT) cashed in too. Its Productivity and Business Processes segment, which includes the Microsoft Teams video conferencing platform, posted $12.31 billion in revenues for its first quarter of fiscal 2021, an 11.21% increase.
This year, home entertainment came out as a major trend as consumers sequestered in their residences and sought out the latest games, gadgets and streaming services to pass the time. One of the most talked-about – and hard to find – products is the PlayStation 5 by Sony Corp. (Tii:SNE). The electronics giant’s shares are up 39% for the year as demand for at-home entertainment reached new heights. While it was a bit iffy earlier in the year, the return of sports was nothing but good news for companies like DraftKings Inc. (Tii:DKNG). As a result, the sports betting platform’s shares skyrocketed more than 380% for the year.
Other home entertainment winners included players in the streaming video space, such as Netflix (Tii:NFLX), which added nearly 16 million new subscribers during its first quarter alone.
The ESG Movement
Once a niche market, the environmental, social and governance (ESG) movement has entered the mainstream. Whether it’s inclusive hiring practices, reducing the carbon footprint or consumer protection measures, ESG investing has taken off in 2020. This growth is underscored by BlackRock announcing that all $7 trillion of the investment management giant’s assets would be governed by ESG considerations. Further, according to Fidelity International, stocks with higher ESG ratings had better returns in the first three quarters of 2020 for every month except April.
Brands that benefitted from this trend include electric vehicle manufacturer and clean energy company, Tesla, Inc. (Tii:TSLA), whose shares are up roughly 574% for the year. Another environmental play, SunPower Corp. (Tii:SPWR) gained more than 490%. The manufacturer of photovoltaic cells and solar panels beat third quarter EBITDA guidance and raised its 2020 EBITDA forecast. Shares of graphics processing unit manufacturer Nvidia Corp. (Tii:NVDA) are up 120% for the year. The company has comprehensive policies and programs related to diversity and inclusion, employee health and safety, and other ESG areas.
These are just a few of the brands that came out ahead in 2020. Whether these trends will continue throughout 2021 or new ones emerge remains to be seen. There will undoubtedly be some surprises in the coming year, but there will be consumer brands at their forefront regardless of the prevailing trends.
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