This is how the coronavirus affects the technology sector

Technology and covid 19

Technology stocks outperformed. Valuation and debt financing are likely to remain under pressure.

If the economy stabilizes again, there could be big differences between some companies: some will survive and have gained market share, while others will not survive. We focus on companies with long-term growth potential and strong balance sheets, i.e. in the areas of technology, consumer discretionary, FinTech and healthcare.

Trends will accelerate

A major impact of the crisis is accelerating the “connected consumer” trend. The first consequence is the marked increase in demand in the rapidly growing online trade. One example is the online grocery trade, which has so far had weak market penetration.

The COVID 19 crisis is giving these companies a tailwind on the path to profitability as they can attract new customers at very low acquisition costs. In 2019, around 5% of global GDP was spent on technology. By 2030, this number is expected to enhance over 10% of GDP. One area affected by digitalization is payments.

The growth of payments is driven by e-commerce, consumer habits, but now also for hygienic reasons because the need to limit physical contacts when shopping for groceries leads to greater use of electronic means of payment.

Rise of the Chinese technology giants

China is a good breeding ground for opportunities within major technological trends. It is the country with the best development since the beginning of the year and seems to be quite well positioned compared to the rest of the world.

The long-term trends of the Chinese new economy include investment opportunities in online trading, data centers and in the healthcare/technology sector with investments in an online medical platform.

The elixir of life for the economy

Consumer services that use technology to capture customer behavior data have developed well so far and will continue to do so. The speed of data flow is critical to identify and use consumer trends.

Such companies have direct access to consumer habits and can quickly adapt to shifts in purchasing behavior; this gives them a very high level of competitiveness. But data is not only helpful for e-commerce companies. Because all digital platforms have a clear advantage over established companies when using data.

Technology companies are seen as the lifeblood of the economy during the crisis as they help consumers organize their lives at home. Regulatory authorities will, therefore, be careful not to target them as they are considered extremely important to society even if the focus on the protection of personal data will remain. Large mergers and acquisitions face difficulties in the medium term; significant mergers between large market participants are unlikely.

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