Buy these stocks on the dip related to the coronavirus, Wall Street analysts say

Investing

A customer pushes a cart of outdoor items past a membership desk at a Costco Wholesale Corp. store in Naperville, Illinois.

Daniel Acker | Bloomberg | Getty Images

(This story is part of the Weekend Brief edition of the Evening Brief newsletter. To sign up for CNBC’s Evening Brief click here )

The deadly coronavirus continues to hit certain areas of the market as investors worry it could stall economic growth, but Wall Street analysts told clients this week that there are still plenty of buying opportunities.

CNBC examined recent Wall Street research to find stocks that analysts say have upside amid concerns about the coronavirus. The stocks include Mosaic, Royal Caribbean, Costco, Alibaba and Spirit Airlines.

Costco

Costco investors shouldn’t worry too much about the coronavirus situation, according to Telsey Advisory Group. The retailer reported strong sales numbers this week and Telsey believes Costco’s small presence in China gives clients some protection in their portfolio.

We believe Costco should be relatively less impacted by the coronavirus, given its limited geographic exposure,” analyst Joe Feldman said.

Costco does have one store in China, but the company doesn’t expect much impact from the worrisome virus.

“We anticipate limited supply chain issues, given the high consumables mix,” he said.

Shares of the company are up 2.5% on the week.

Royal Caribbean

The cruise ship operator reported strong fourth-quarter earnings this week but warned more cancellations could be coming due to the uncertainty surrounding the virus.

The stock is down almost 3% on the week.

But coronavirus fears surrounding the company are “overblown,” according to Macquarie. The firm says the company will lean on its North American business to get through the turbulence.

“We don’t think the coronavirus impact will carry particular weight on the underlying business fundamentals especially given North America strength,” they said.

The firm also added that China is really only a small part of the company’s business.

“China, while a positive catalyst in the RCL story overall, was only expected to be 6% of 2020 capacity and 4% Q1, and we don’t expect serious long-term erosion in consumer confidence from this.”

Alibaba

Meanwhile, another firm said this week that the more consumers that stay home, the more advantageous it becomes for e-commerce companies like Alibaba.

“We believe that China internet and logistics companies are somewhat sheltered via onlinification of all products and services,” Bernstein said.

“Volume growth should remain sturdy as more people will stay home, they will shop more online and tend to pass items to families and friends by couriers rather than gatherings,” they said.

Shares of Alibaba are up almost 5% on the week.

Here’s what else analysts are saying about stocks to buy during the coronavirus epidemic:

Mosaic – Bernstein, Outperform rating

“The impact on the phosphate markets already appears meaningful – the majority of Chinese production is in central China, and prolonged shutdowns could materially impact market balance. Profercy noted on Friday that prices are already rising on supply fears, while Chinese producers have withdrawn all domestic offers. The ultimate impact will be determined by the length of the shutdown, as production continues for now (albeit at a lower rate) as producers draw down raw materials inventories.”

Costco – Telsey, Outperform rating

We believe Costco should be relatively less impacted by the coronavirus, given its limited geographic exposure. Costco operates 785 stores worldwide, with just one store in Shanghai, China (0.13% of total stores), 13 stores in Taiwan (1.65%), 16 stores in Korea (2.0%), and 26 stores in Japan (3.3%). We anticipate limited supply chain issues, given the high consumables mix.”

Royal Caribbean – Macquarie, Outperform rating

“We think impact from nCoV is overblown and raise TP. … Underlying business should weather virus thanks to North America. … We don’t think the coronavirus impact will carry particular weight on the underlying business fundamentals esp. given N.A. strength. China, while a positive catalyst in the RCL story overall, was only expected to be 6% of 2020 capacity and 4% Q1, and we don’t expect serious long-term erosion in consumer confidence from this.”

Alibaba – Bernstein, Outperform rating

“The shift from offline to online retail is likely to accelerate because of the epidemic, with opportunity for Alibaba, JD, PDD (not covered). … Similar to eCommerce, the Chinese express delivery and logistics sector is likely one of the very few to keep up with their business in this epidemic. Volume growth should remain sturdy as more people will stay home, they will shop more online and tend to pass items to families and friends by couriers rather than gatherings.”

Spirit Airlines – Citi, Buy rating

“Within the Americas airline space, Spirit Airlines has several factors in its favor, including no 737MAX exposure, no China exposure and no synthetic fuel hedges, while oil prices have fallen ca. 15% this year so far. On the latter topic, Spirit’s fuel expenses are ~29% of its 2020E opex, vs. just ~20% for the network carriers. If this weren’t enough, Spirit’s 1Q’20 guidance could also positively surprise the market.”

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