3 Stocks UP BIG During the Lockdown

Hey guys, welcome back to the channel! In this video, we're going to be talking about three stocks that have just gone absolutely beast mode because of the lockdown.

So, it's kind of an interesting situation because, generally speaking, the lockdowns happened and business profits have been hurt. People have had to work from home, not been able to go out to restaurants and blah blah. So, generally speaking, business has been suffering; business has been hurt. But there's definitely been some select few businesses where the shutdown has actually played into their business model perfectly, and it's actually helped them have a really strong 2020.

So, with that said, let's get stuck into it. [Music]

So, the first stock I wanted to talk about is one that has benefited greatly from the shutdown, both through the stock price and also just through their business results. That stock is Netflix. Netflix, during the shutdown, has added so, so many subscribers because people are, you know, at home more. They've been stuck at home in many instances; they're looking for things to do to pass the time, to keep themselves entertained. So, naturally, people are turning to the TV, and the Netflix subscriptions have just gone through the roof.

So have a look at this. I've drawn up the last year or so of Netflix subscription additions. You can see here Q2 last year: 2.7 million goes up to 6.7 million, 8.76 million—so pretty strong numbers. But then we hit 2020 Q1: 15.77 million new subscriptions, and then in Q2 that momentum has continued, another 10 million new subscriptions. So, this clearly shows that people have been looking for things to do while they're stuck at home.

This has greatly helped out Netflix. I'm sure it's helped out Disney Plus and Amazon Prime and all those other ones too. But the interesting thing is that it's also helped not only their subscription numbers, but it's helped their business earnings; it's helped their earnings really shine in 2020.

So, if you don't know much about Netflix, Netflix over the last couple of years has had to really change their business model. They used to just license other people's content, chuck it on their platform. Now, their focus is much more on producing their own premium original content that keeps people coming back specifically for Netflix's content. Now, because they've been focusing on that, it's taken them a hell of a lot of money to actually put that new business model into place, get their productions up and running. All of that stuff costs a hell of a lot of money for them to be able to match it with the big boys.

So, usually, what this has meant is, from quarter to quarter, Netflix has been losing money consistently as they try and add more and more original content.

So, here I wanted to look at two numbers: the operating cash flow and the free cash flow. Now, the operating cash flow is just the amount of money the operations of the business pull in for that company, okay? And usually, the operating cash flow for Netflix is consistently negative. For example, in Q4 2019, their business operations made them a loss of 1.4 billion dollars. However, thanks to the 15 million subscriber additions in Q1 2020, they had an operating cash flow of 260 million, and then in Q2, it was even better—over 1 billion dollars.

And because the lockdown has caused them to slow the production process of their new up-and-coming shows, they haven't been able to make as much content as what they would have liked. It's also meant that their spending hasn't been as high, so that impacts their free cash flow. Because, of course, the free cash flow is just the operating cash flow—the amount of money that the business operations make minus the capital expenditure—the money that you're putting towards either maintaining or growing your business.

As you can see, free cash flow was really negative—negative 1.6 billion dollars in Q4 2019—but now in the last two quarters, we've seen 162 million and 900 million dollars of free cash flow. So that is a complete turnaround of the trend that we've been seeing from Netflix.

So, I'm sure the Netflix executives would be quietly pretty chuffed that the lockdown has actually boosted their business so much. And, of course, long-term Netflix shareholders will be very happy as well. The stock's gone up 54% in 2020 as a result of this amazing performance.

One of the sad things, though, is that despite 2020 being so good, the management don't actually expect this performance to continue. They actually believe that a lot of the subscriptions that they've added this year have just been pulled forward from future quarters. Essentially saying that they just believe that people that were on the fence or considering getting Netflix just decided to pull the trigger in the first two quarters because it was an opportune time to do so.

So, because of this, the management team are only expecting subscriptions to go up by about 2.5 million in the next quarter. So, they're definitely kind of being a bit conservative, I think, and just saying that basically all of the success they've had is just pure pull forward from future quarters.

But anyway, that is Netflix. It is certainly just a business or a business model that has just benefited perfectly from people being stuck at home. So, there you go. Congratulations if you're a Netflix shareholder this year! That's all I can say.

Anyway, going on into the second business I wanted to talk about—absolute beast stock in 2020 has benefited like you would not believe from the shutdown. It is, of course, Amazon. Amazon has been absolutely overrun during the lockdown. So many people have been buying stuff through Amazon, so much so that their well-known Prime delivery service, which usually gets your packages to you in one or two days, has seen their delivery times slip to five days for in-stock items. But for some items, it's taking up to a month now.

This was partly due to Amazon changing their logistics—changing their kind of working environment to make things safer for their employees during the shutdown. But the main reason that the deliveries have slowed up is because Amazon's just getting overrun because everyone is stuck at home. Business is shutting down, or was shut down through a lot of Q1 and Q2, and people still need to buy stuff, right? We still need our stuff to run our everyday lives. So, naturally, people are turning to e-commerce, and of course, Amazon's not the only one, but it's the biggest one. Amazon was just absolutely overrun.

Now, if we have a look at Amazon's revenue chart, usually what happens is Q4 is always really strong—Christmas quarter—very, very strong for e-commerce. Then we see a massive drop down in Q1, and then it slowly picks up over Q2 and Q3. That's pretty standard; that's to be expected. This year, however, they managed to pull off a Q4 result in Q2; they had 40% year-over-year revenue growth in Q2—absolutely staggering! Essentially, people were buying as much stuff through Amazon as what they normally do around Christmas time. That is unbelievable!

And you can just see how, if you shut down retail, just like physical retail stores, then e-commerce is just going to absolutely shine through. You can actually see that happen if you break down Amazon's revenue into their different sections because you can see that there was a drop-off in sales in their physical stores, obviously due to the lockdown.

But to make up for it, they had 48% year-over-year growth in online store sales, 52% year-over-year growth in third-party seller services—that's commissions that Amazon gets from other people selling on their platform—and then they've also got 29% year-over-year growth in Amazon Prime subscriptions.

So, for Amazon, literally, Christmas has come early, and Christmas has also come early if you're an Amazon shareholder because, in 2020 alone, the stock is up about 66%. Five years ago, this stock was at 500, and now here we are—2020, the stock is over 3,000 US dollars per share! That's pretty crazy! So, happy days if you're an Amazon shareholder.

But let's move on into the third stock that has really benefited from the shutdown, and that stock is Zoom. Zoom, oh my gosh, what a success story coming out of the lockdown! So, if you don't know Zoom, I don't know how you wouldn't know Zoom at this point, but they basically offer software solutions for, you know, doing online meetings.

So, yeah, obviously, this one's going to be very much benefited by everybody being shut down and particularly people having to work from home. Imagine just your target market, like your total addressable market, just expanding two, three, four, five, six times in the space of just a few weeks. I mean, that in itself—even if you just kicked up hills and did no advertising, nothing whatsoever—that in itself would drag up your sales quite tremendously, so Zoom just benefited.

This total addressable market has just skyrocketed all of a sudden, and they've benefited from it. Now, one of the weird things to watch with Zoom is that even though we've just seen the end of Q2 2020, Zoom reports their earnings so bizarrely—they actually just reported Q1 of 2021. Crazy, I know! But that was February, March, and April of 2020. I have no idea why they’re so different; I do not understand at all why they've done this.

However, in the report, they did post some pretty staggering results. They posted revenue of 328 million dollars, which is a quarter-over-quarter growth of 74%. I mean, just have a look at the chart of their revenue: it's kind of just, you know, it's growing consistently in 2019, and then bang! 2020 hits, the shutdown happens, and employers are scrambling to get their team set up.

Everybody starts working from home, and the revenue for Zoom just absolutely skyrockets. And just like the other stocks, it wasn't just a good time in terms of revenue. If you were a Zoom shareholder, you would have had a fantastic 2020 because the stock is up 276% year-to-date.

So, there you go! There's a get-rich-quick scheme for you! It's basically done a Tesla. It's just skyrocketed—absolutely skyrocketed—in 2020. But to be honest, the stock now does have a lot to answer for because, based on their most recent quarterly earnings, they have a P/E ratio of 1. But who knows? If they keep growing their revenue at like 74% quarter over quarter, then it would only take a couple of years for that P/E ratio to be dragged way back down to normal levels.

Yeah! If you can maintain quarter-over-quarter growth of 74%, you get rich very fast, that's for damn sure!

Anyway, guys, that is it for this video. They are three stocks that I have found really interesting to follow in 2020. It's just the perfect situation where, even though it seems like the sky is just falling, and for most businesses, they're being shut down, business profits are being hammered, revenues dropping down the toilet—but you know, for some businesses, there's always some business out there where their business model just works.

And even in the worst of worst conditions, a company has found a business model that works with that particular economic scenario. And in this scenario, with a lot of businesses being, you know, physical business being shut down and a lot of people staying home, it makes sense that companies like Netflix, Amazon, and Zoom all can benefit from what's going on in the world.

So, anyway, guys, I found that really interesting. It always teaches you to really go back and look at the business model: how does this company make money? Because even though you see on TV, people are screaming and going, "Yeah, this is not a great time!" a lot of business models can actually withstand or benefit from different economic conditions, even when the broader economy looks like it's going down.

Anyway, that's where I'll leave this video. I hope you enjoyed it! Leave a like on the video if you did enjoy it or if you found it useful. As I always say, it helps out the video massively. It's the easiest way to support the channel, so I really appreciate it.

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So anyway, guys, that's it from me for today! Thanks very much for watching. I'll see you guys next time! [Music] [Music]