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Have tech stocks been the real winners of the Covid-19 pandemic?

Sabuhi Gard
·3-min read
Male and Female Architects Wearing Augmented Reality Headsets Work with 3D City Model. High Tech Office Professional People Use Virtual Reality Modeling Software Application.
Male and Female Architects Wearing Augmented Reality Headsets Work with 3D City Model. High Tech Office Professional People Use Virtual Reality Modeling Software Application.

Tech stocks like Tesla in the US and Zoom have seen a 300% rise and 270% rise respectively in their share price, vastly outpacing the growth in any of their UK counterparts like Games Workshop and IQE. Shares in Games Workshop have risen 131% and IQE’s shares have risen 164% during the Covid-19 pandemic year.

It is no surprise that these tech stocks have performed well over the past year, if we consider what they have been doing. Tesla, for example, produced over 500,000 vehicles in 2020 and finished off its sixth consecutive profitable quarter.

If we turn to Zoom next, it is not hard to see why this US video-conferencing company has been so successful over the past year. So many people globally have made the switch from face-to-face to online – from working, to teaching to socialising. Zoom’s revenues for 2020 reflected this demand, which rose 88% from 2019 to $622.7 million.

You could say these tech stocks have been the real winners of the Covid-19 pandemic, but are they over-valued and a little over-priced to add to my portfolio? I might exhibit a little caution.

Anyway, if these tech stocks are the winners, who have been the losers over the past year? There have been some howlers!

Travel and leisure stocks have not fared well over the past year due to Covid-19 and several UK national lockdowns.

IAG, which owns British Airways, Iberia and Vueling, saw its shares fall 66% since March 2020. In February of this year, IAG announced it had lost approximately €7bn as a result of Covid-19 due to the limits on international travel. Even while running during 2020, most flights were limited to 20% capacity.

Another travel firm hit by the Covid-19 pandemic is Norwegian Cruise Line whose shares have fallen 41% over the past year. In May 2020, it faced a liquidity crisis but was subsequently bailed out by “different investment sources”. The final death knell came from the US Centre for Disease Control and Prevention which stated that it doesn’t expect cruises to restart before June 2021.

Overall, it would be fair to say that there have been real winners – tech stocks – and real losers over the past year depending on what sector you look at. The big question is whether the demand for the services offered by these tech companies will continue post-Covid-19? If so, I might add these techs stocks to my portfolio for the long term. As for the other stocks in the travel, leisure, hospitality and retail sectors the only way is up (right?) once lockdown measures ease.

The post Have tech stocks been the real winners of the Covid-19 pandemic? appeared first on The Motley Fool UK.

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Sabuhi Gard has no position in any share mentioned. The Motley Fool UK has no position in any share mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021