These three companies are doing exceptionally well thanks to the pandemic. Will they be able to sustain momentum once the madness dies down?
The over-the-top (OTT) industry, at-home fitness market, and vaccine developers have had a stellar year thus far all thanks to the COVID-19 outbreak. Peloton (NASDAQ: PTON), Netflix (NASDAQ: NFLX), and Novavax (NASDAQ: NVAX) have all seen amazing growth in stock price and where applicable, memberships. These are great investments right now but will they be able to sustain their growth and maybe even thrive after the chaos dies down?
Regular gym-goers are a disciplined lot who follow a schedule and rely on a repeated set of workout routines. The Quarantine 15 club has claimed 35% of all Americans as members. I don’t know about you, but in my neighborhood, there has been a serious increase in daily joggers. When the pandemic hit, all these people went into a panic. Exercise is essential during lockdown, as it helps keep you in shape, lose weight, and combat daily stress.
Enter Peloton, an unprofitable unicorn which had an unremarkable IPO debut last year. The company sells exercise bikes, treadmills, and subscriptions to its streaming exercise classes. Once the pandemic hit, online searches for ‘Peloton’ surged and the company reached a milestone with one million connected fitness subscribers (paying members); additionally, it saw an impressive 92% year-over-year increase in subscription revenue.
The once-unprofitable company is also now in the green, reporting its fiscal Q4 profit of $89.1 million. As for the future, the company has implemented a number of social media features into its hardware, allowing members to tag friends, interests, and send out high-fives; essential now when people are hesitant to return to the gym and are trying to maintain social-distance. The company boasts a 93% annual retention rate and an impressive Net Promoter Score of 86, indicating high brand recognition and likability. Peloton has exceeded Planet Fitness’ market cap by nearly $20 billion and can rely on its subscriptions for steady revenue if hardware sales decrease.
In a report by ExpressVPN, streaming came in as the number one essential digital service during lockdown; users said it saved their mental health, relationships, and that they would rather surrender all outside communication than lose their Netflix subscription. With the growing number of cord cutters, OTT services have taken off as people realize that even if they purchase subscriptions to 5 of the top providers, the expense would be considerably lower than paying for cable. The pandemic added fuel to this revolutionary fire as Netflix grew its subscription numbers by over 25%; more importantly, the company’s churn rate remains the lowest amongst all OTT providers (2%-3% between July 2018 and July 2020).
Even with 40% of Netflix subscribers adding additional OTT services, they still hold on to Netflix, the first mover in the sector, which has allocated $16 billion for original content this year. With numbers like these, it’s little wonder that the company maintains an impressive 87% market share. Netflix still has enough original programming to last it through 2021 and will premiere the massively popular ‘Seinfeld’ in 2021, for which it reportedly acquired rights for nearly half a billion dollars. Although the company is over $14 billion in debt, Wall Street is still confident in its growth as demonstrated by its stock price surge of over 40% for the year; Netflix’s revenue has grown 830% in the last decade.
Novavax is poised to explode if it wins the vaccine race. Wall Street is betting on this as this company has seen the most remarkable stock growth in the list. A $1,000 investment in the company at the beginning of the year would have netted you nearly $25,000, as of September 17. That’s huge! Although the company has never had a successful product released, investors are enthusiastic about Novavax’s positive phase III results for its flu vaccine NanoFlu, fast tracked by the FDA and expected to generate additional revenue for the company.
Novavax uses moth cells to generate necessary molecules at a faster rate than traditional vaccines. This technology has impressed experts at the Bill & Melinda Gates Foundation so much that their subsidiary Coalition for Epidemic Preparedness Innovations (CEPI) invested over $380 million in the company. The Trump administration’s Operation Warp Speed awarded Novavax the highest award to date, $1.6 billion. Positive Phase I results for its vaccine candidate sent the company’s stock soaring over 13% earlier in August and further bolstered investor confidence. Even if the company has to share the gold medal with another vaccine developer, the market for the COVID-19 vaccine includes every human being on the planet and the potential reward for that is huge.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.