COVID cases rising: is it time to get back into tech stocks like Shopify?
The COVID-19 crisis is tightening its grip at the moment. Cases are on the rise, hospitals are being threatened with the possibility of being overwhelmed, and new forecasts are predicting 20,000 new cases per day be the end of December. With many questions still remaining about vaccine production and distribution, is now the time to start looking at tech stocks like Shopify again?
New modeling data is predicting that Canada is going to hit 20,000 new COVID-19 cases per day by the end of December. The data, which comes from the Public Health Agency of Canada (PHAC), is set to be released today. If the forecasts are accurate, Canada would find itself in a crisis situation exceeding anything it has faced so far, and markets would, potentially, do a repeat performance of what we saw earlier this year, pushing tech stocks like Shopify higher whilst the rest of the world’s markets crumble.
Canadian hospitals are finding themselves facing the threat of being overwhelmed; a situation which would see the death rate spike disproportionately to the number of cases as ICUs are forced to turn patients away. With prime minister Justin Trudeau having already called on premiers to ‘do the right thing’ and bring back restrictions only a week ago, we’re likely to see a tightening of social distancing measures as he addresses the nation today.
How are markets holding up?
Despite making some small gains, yesterday’s trading was still somewhat subdued. With the S&P/TSX Composite Index ending just shy of 20pts. up for the day (+0.118%) investors were seemingly non-commital to either direction. This highlights the level of uncertainty in the markets right at this moment.
And with many of the who, what, when, why, and how questions regarding potential COVID-19 vaccines still unanswered, there’s good reason for enthusiasm to remain damped at the moment.
Predictably, this resulted in energy, financial, and utility stocks ending the day down overall, with most of their losses being offset by information technology sector gains of 1.24%. This pattern is largely reflecting the already established COVID-market patterns we’ve experienced earlier in the year indicating that many investors are seeing the heightened Coronavirus threat as a serious issue for at least the next few months.
Shopify jumps 5% on market open today
Confirming the predictable path markets will take over the course of a worsening health crisis, Shopify Inc. (TSX: SHOP) instantly jumped by 5% on today’s market open. This is reflected in the broader market response this morning, where mining was the only other sector besides tech to not open lower.
With the exception of a handful of stocks, however, the strength of the moves this morning was still relatively tame. For all intents and purposes, it would be fair to say that things have remained relatively flat, with investors not ready to commit to either side of the vaccine/worsening-crisis coin yet.
With Shopify showing such strength in a non-commital market, is now a good time to buy?
At the moment, Shopify is trading at a substantial discount to its previous highs just shy of $1500 per share from back in September. What this means for investors willing to take bets on an intensifying COVID-19 situation is that it’s currently offering good value with a lot of potential upside—the market’s already showing there’s a healthy appetite for Shopify shares in the face of a crisis.
This does, of course, come with some downside risks. The strong market reaction to vaccine news saw Shopify drop close to 14% in a single day’s trading. It’s also worth keeping in mind that news of vaccine distribution and successful inoculation would likely put further downwards pressure on this stock.
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