The coming Covid-19 vaccine is great news for mankind — but bearish for work-from-home stocks including some in the S&P 500. Analysts, though, still see great things for remote work even in a vaccinated world.
Analysts think 10 stocks in the Direxion Work From Home ETF, including technology stock Box and Twilio plus Amazon.com, should be worth at least 20% more in just 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Amazon.com is in the S&P 500.
Many work-from-home stocks slipped Nov. 9 on the news a Pfizer miracle vaccine may be on the way. Some investors think the urgency to let workers plug in remotely could cool. The Direxion Work From Home ETF sagged 1.9% last week. And the ETF, launched on June 25, is up just 12% from its debut, trailing the S&P 500's 14.7% gain this year.
"Stocks rallied with the news, although unevenly as some of the winners in the work-from-home environment underperformed those more sensitive to the ongoing shutdown and limitations," says Bill Hornbarger, chief investment officer at Benjamin F. Edwards.
Big Work-From-Home Gain
The work from home theme perfectly positioned many stocks in much of the year.
The massive winner is Zoom Video, which turned into a household name during the pandemic. Shares of Zoom, a provider of video conferencing, shot up 493% this year. That makes it the top performing stock in the Direxion Work From Home ETF this year so far.
But Zoom also shows the tougher road ahead of it in a world with a Covid-19 vaccine. Shares dropped 19.3% last week as investors worried gains might be more difficult. Profit is only expected to rise 4% in fiscal 2022, ended in January 2022. That's down from its 617% profit growth expected in the year ended in January 2021
"The work-from-home trade may have further downside. There are plenty of great companies in this basket, but is Zoom really worth the same as 3M or Caterpillar in a world set to reopen in 2021?" said Nicholas Colas, co-founder of DataTrek Research.
Analysts: Not Giving Up On Work From Home Yet
Skepticism is high, but analysts still see work-from-home opportunities.
Amazon.com is the work-from-home play with the highest IBD Composite Rating of 98. The online retailer and cloud computing company's shares are up 69% this year. That makes it one of the top stocks in the S&P 500 this year.
But if people are vaccinated, will they shop in physical stores more? Will companies demand less cloud computing capability? Investors knocked the stock down 5.5% in the week following the vaccine announcement, to 3,128.81. And yet, analysts still think Amazon will trade up to 3,821 in 12 months. If they're right, that's 22.1% upside.
And then there's Box, a tech company offering cloud-based computing services. The stock has lagged most stay-at-home stocks this year, rising just 2.2%. But due to that lagging, it actually rose 1.4% in the week of the vaccine announcement to 17.15. Analysts, though, think the stock could be worth 24.75 in 12 months. That's 44% upside, if they're right.
Will the work-from-home phenomenon stick around once employees are vaccinated? It's too soon to say. But analysts still think there's upside in this theme popular in most of 2020.
Work-From-Home Stocks Analysts Like Best
| Company | Symbol | Stock % Change Since Pfizer Vaccine Announcement* | 12 Month Upside | Sector | Composite Rating |
|---|---|---|---|---|---|
| Ping Identity | PING | -10.5% | 60.4% | Information Technology | 25 |
| Box | BOX | 1.4% | 44.3% | Information Technology | 67 |
| Inseego | INSG | -0.7% | 41.3% | Information Technology | 61 |
| Proofpoint | PFPT | 2.8% | 35.3% | Information Technology | 60 |
| Upland Software | UPLD | -7.7% | 32.6% | Information Technology | 91 |
| Elastic | ESTC | -9.1% | 29.8% | Information Technology | 70 |
| Twilio | TWLO | -6.1% | 28.7% | Information Technology | 86 |
| VMware | VMW | 1.1% | 24.4% | Information Technology | 67 |
| Slack Technologies | WORK | -4.8% | 22.2% | Information Technology | 24 |
| Amazon.com | AMZN | -5.5% | 22.1% | Consumer Discretionary | 98 |
Sources: IBD, S&P Global Market Intelligence, Direxion, * From Nov. 6 close to Nov. 13
Follow Matt Krantz on Twitter @mattkrantz
