Coronavirus Infects Wall Street: Stocks to Gain & Lose

Tirthankar Chakraborty

The spread of a contagious disease in China weighed heavily on several companies, especially those with considerable revenue exposure to the Asian country. The outbreak of coronavirus in China claimed six lives and almost 300 have been infected. The virus has certainly raised quite an alarm, affecting respiratory organs, quite similar to SARS (severe acute respiratory syndrome). Lest we forget, SARS, which erupted in 2002, resulted in the death of 800 and triggered a severe economic slump that fettered global stocks.

With so many people affected ahead of the Lunar New Year holiday, travel-related stocks were hit hard. After all, market pundits fear possible contagion, as hundreds of millions of passengers are expected to travel during the upcoming holiday season. Travel-related stocks’ decline aggravated after the Centers for Disease Control and Prevention recently confirmed that one of the individuals flying back to the United States from China was diagnosed with coronavirus.

Stocks That Were Hit Hard

Airline stocks were collectively affected, as the Dow Jones Transportation Average slipped 1.9% on Jan 22. Individually, shares of United Airlines Holdings, Delta Air Lines and American Airlines Group dropped 5.4%, 4.1% and 4.4%, respectively.

At the same time, shares of Booking Holdings, Expedia Group and TripAdvisor declined 3.5%, 1.9% and 1.6%, respectively. In fact, U.S.-listed Shanghai based Trip.com Group saw its shares tank 9.3%, the steepest decline among stocks listed on the Invesco Golden Dragon China exchange-traded fund that tracks companies which derive most of their revenues from China.

By the way, manufacturers of luxury items also felt the heat. After all, such companies rely heavily on outlays by Chinese tourists. Notably, shares of Estee Lauder Companies, Coty and Hennessy Louis Vuitton S.E shed 1.1%, 2% and 2.3%, respectively.

Cruise operators were also among the worst hit. Shares of Royal Caribbean Cruises, Carnival Corp and Norwegian Cruise Line Holdings lost 4.7%, 2.6% and 3.2%, respectively. After all, Royal Caribbean, Carnival and Norwegian had generated 9%, 3% and 2% of their respective revenues from China over the last 12 months.

Talking about revenue exposure, energy giant Chevron also saw its shares slid 1.7%. This is because Chevron’s revenue exposure to China is about 27%. Boeing also took a beating. Boeing’s shares fell 3.3%, as the manufacturer of commercial jetliner has a slightly more than 13% revenue exposure to China, according to FactSet.

Overall, the Dow fell 0.5% since the combined exposure of the components in the blue-chip index is 7.8%, added FactSet. Outside the United States, most of the revenues generated by Dow components are from China.

However, not everyone has been subjected to the decline. Let us thus take a look at the potential gainers from the spread of the virus.

Experimental Vaccine Stocks & Biotech Players Gain

Obviously, shares of vaccine manufacturers have gained sharply on concerns over the new virus. Novavax, Inc. NVAX, a late-stage biotechnology company, saw its shares soar 72% on Jan 21. The company is primarily manufacturing two late-stage vaccines for the flu and various other infectious diseases. Another nano-biopharmaceutical company, NanoViricides, Inc. NNVC witnessed its shares climb more than 100%. After all, the company is known for developing nano-medicines for viral diseases like swine and bird influenza.

Most importantly, medical technology company Aethlon Medical, Inc.’s AEMD shares surged 12.1%. The company is known for making hemopurifier that is used to treat viral diseases. Last but not the least, development stage biopharmaceutical company Oncolytics Biotech Inc.’s ONCY shares were up 14.5%. The company is known for developing pharmaceutical products for the treatment of deadly viruses and cancer. What’s more, the company currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for its current-year earnings has increased 6.3% over the past 60 days. In fact, the company’s expected earnings growth rate for the current quarter is 33.3%, in contrast to the Medical - Biomedical and Genetics industry’s projected decline of 69.6%. To top it, the company has outperformed the broader industry over the past year (+79.3% vs -1.4%).

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