Dear Readers,
We are now more than 100 days into the Pandemic, quarantine in our homes and watching the virus ravage human lives and livelihood. As I am writing, globally more than 350,000 people have lost their lives and millions have lost their jobs. No one knows when this will end but countries have started to show signs of enough is enough and want to remove the restrictions. Only time will tell if opening the economy early will lead to faster recovery or in analyst terms a V shaped recovery.
In today’s blog I want to focus on sectors and industries who went through this crisis and either received headwind or tailwind depending on the nature of their business model and the end goal they serve. I have tried to analyze here by dividing them into Winners and Losers:
1. The Winners : These sectors have serendipitously found themselves on the right side of the Pandemic. The ideal strategy for these companies is to aggressively invest in opportunities and growth.
- Ecommerce marketplaces : Even prior to the Pandemic these firms were doing well thanks to the explosion of smart phones and the omnipresent Internet. This crisis came as a boon for this industry as people isolated in their homes ordered their basis necessities such as food, medicine, daily use items etc online. The big daddy of the industry Amazon added hundreds of temporary gig workers to manage the onslaught of orders. According to media reports it plans to add 100,000 more in coming months. This is clearly reflected in the stock price which jumped almost 50% during the period putting its founder Jeff Bezos as the world’s richest man once again.
Amazon Stock Price in last 3 Months
Source: ycharts.com
- Pharmaceuticals: Pharmaceutical companies are inevitably playing a pivotal role in the crisis. Gilead, which owns the rights to treatment drug Remdesivir; Moderna, actively working on a vaccine; Roche, a major supplier of testing kits and many more firms. These firms are expected to do well in the coming months as people fearing the virus turn towards anything that provides a glimmer of hope of containing it. All this is off course subjected to the success of the clinical trials. Moderna’s stock price has jumped almost 4 times in the last three months on the news of promising success in developing a vaccine.
Moderna Stock Price in last 3 Months
Source: ycharts.com
- Logistics/delivery: As people around the world are restricted in their homes, products and services will need to be delivered. Cainiao, Alibaba Group’s logistics arm, launched on January 25 in response to the increased demand for protective clothing and medical supplies, especially for front-line medical staff in Hubei province. In just nine days, Cainiao received more than 7,000 calls and shipped over 5 million medical products to Wuhan and neighboring cities. Fedex and DHL the two big logistics firm saw big drop during the beginning of the year as things slowed in China but are now picking up. Uber said to be in talks to acquire grubhub as it fortifies its food delivery business.
Grubhub Stock Price in last 3 Months
Source: ycharts.com
- Video conferencing : As the Pandemic unfolded homes turned into offices and work from home became the new norm. No one benefited more out of it than the Videoconferencing start-up Zoom. The company’s sales and share price are already up over 50% in 2020. Webex from Cisco and Skype and Teams from Microsoft are also seeing major upticks in sales.
Zoom Stock Price in last 3 Months
Source: ycharts.com
- Entertainment streaming and gaming: As people spend longer hours at home they turned to platforms like Netflix, Amazon Prime video, and Disney+ for entertainment. Naturally all the platforms reported increased viewership. Netflix the leader in the category added 15 million new subscribers and still adding during the period. The share price jumped more than 35% during the last three months.
Netflix Stock Price in last 3 Months
Source: ycharts.com
- Education Industry : Most schools, universities and private education providers were closed physically, but not necessarily their operations. As more and more people are confined to their homes, there is a golden opportunity for education institutions to expand the scale and scope of their operations online. Many existing MOOC providers such as Coursera, Edx , Udemy have been successful in doing well during this period.
Source :
1. Based on Alexa Ranking. Numbers in parentheses point to the change in ranking since March 14th.
2. Number of sessions in March and percent change from February. Based on SimilarWeb data.
2. The losers: The Pandemic badly bruised several sectors as lockdown restrictions weighed heavily on these sectors. For these firms, their managements will need a herculean effort to pull through the crisis. Many of them are seriously damaged and have laid off thousands of employees. The natural strategy in these sectors will be to cut costs, de-risk operations and be ready to return when conditions improve.
- Travel Industry: Needless to say this industry got severely affected by the Pandemic. The global airline industry estimates up to US$200 billion in emergency support, and Boeing has asked for US$60 billion in assistance for aerospace manufacturers as the international travel industry bleeds cash.
United Airlines Stock Price in last 3 Months
Source: ycharts.com 
Boeing Stock Price in last 3 Months
Source: ycharts.com
- Hotel and tourism sector : This sector has the maximum number of job losses as hotels, restaurants and other tourism depended businesses came to a grinding halt. According to data published in Statista the job losses in the travel and tourism industry globally would exceed 100 million.
Job losses predicted in different geographies in the travel and tourism sector
Source: Statista
One of the prominent player in the industry, Airbnb has bled cash profusely and was forced to shelve its IPO ambitions. It had no other option than accept money from private equity firms. A similar fate awaited OYO the online hotel and room aggregator from India. The world’s largest hotel chain by rooms Marriott has been severely affected as well with shares losing more than 35% during the period.
Marriott Stock Price in last 3 Months
Source: ycharts.com
- Oil and gas (Energy) : This sector always remains in the news due to its positive correlation with geopolitics. Prior to the advent of the Pandemic the sector was not doing well as Russia, Saudi Arabia and other Opec members pumped in much more oil than the demand can suck it. The result a massive drop in Oil prices affecting both Oil exporting countries and big firms such as BP.
Brent Crude Price per Barrel in last 3 Months
Source: Trading Economics
WTI Crude Price per Barrel in last 3 Months
Source: Trading Economics
BP Stock Price in last 3 Months
Source: ycharts.com
- Retail (Brick and Mortar Stores): With people confined to their homes, there is no use of traditional retail stores being open. This drove many companies to bankruptcy. JC Penny a prominent and household name in U.S. filed for bankruptcy in May 2020. J. Crew another retailer filed for Chapter 11 bankruptcy protection on May 4. The company now plans to convert $1.65 billion of its debt into equity. Macy’s , a popular fashion retail store had its share price drop to a third from February 2020 levels.
Macy Stock Price in last 3 Months
Source: ycharts.com
Investment Banking: Hundreds of London and New York investment bankers may lose their jobs amid a slump in deal-making. A multiyear boom in mergers and acquisitions activity came to a halt by the end of March. This ravaged corporate share prices. Shares of leading US banks JPMorgan Chase, Bank of America and Citigroup are all down more than 30% from January highs. The overall value of deals in the first quarter fell 28 per cent from a year ago to $698bn, the weakest year-opening period since 2016 according to Refinitiv published in FT
According to data in Refinitiv published it FT, the M&A activity the reduction in deal activity was particularly steep in U.S. and one of the reasons was the severity with which New York city was affected by it. 
The result of this got reflected in shares of leading U.S banks. JP Morgan shares fell by 35% during the period. 
JPMorgan Stock Price in last 3 Months
Source: ycharts.com
- Entertainment and Sports Industry: European nations and U.S cancelled their biggest sporting events of this year due to the pandemic leading to billions of dollars of lost revenue in advertising and television rights. The International Olympic Association has also postponed the Olympic to next year. Fox corporation owner of Fox Sports has its share price reduced by 15%.
Fox Corporation Stock Price in last 3 MonthsSource: ycharts.com
Similarly Disney the owner of ESPN and the mighty Disney world theme parks and movie studios had a 30% drop in share price in March but recovered marginally as things started to get better in China in April.
The Walt Disney Co Stock Price in last 3 Months
Source: ycharts.com
Conclusion and Path Forward:
- Companies in the Travel, Tourism and Hospitality business are in the eye of the storm.
- Companies whose business model include more direct selling and people to people contact are affected more.
- High fixed cost and less flexible industries suffered more than agile industries.
- Companies with high debt and cash burn rate are badly damaged.
- Companies providing discretionary services or products will tend to lose margins
Every crisis creates new opportunities and new winners and losers. This is once a century event and only the smart and agile companies will survive.
Muses 