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More Foot-Traffic & Less Click-Traffic

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Yesterday's hopeful vaccine news from Pfizer (PFE - Free Report) and BioNTech (BNTX - Free Report) has put a light at the end of the tunnel for value investors. We are seeing massive portfolio reallocations as normality begins to be priced into equities. 2020's underperforming cyclicals are finally the stars of the show, driving the value-driven Dow and S&P 500 indexes to all-time highs. Secular tech is taking a breather as it grabs a seat on the sidelines.

Some of the pandemic's most pronounced digital trends are seeing a reversal. Investors and traders are adjusting the equity market for the anticipated increase in foot traffic and click traffic decline, with a vaccine ostensibly on the short-term horizon.

Vaccine Reversals

The world of technology has provided us with digital solutions to satisfy almost every human necessity from the comfort of your home. COVID-19 has conditioned global societies to rely on tech more than ever before, and the implications of the 'new normal' are yet to be realized.

Everyone just wants things to go back to normal, and this vaccine is a leap in that direction. 

There is no question that 2020's rapid digitalization will continue as technology's advantages are leveraged in every sector of the economy. Still, there is value in this year's cyclical underperformers.

This is the day that value investors have been waiting for all year, but I wouldn't be chasing the value rally on this potential vaccine announcement. There is still an enormous amount of uncertainty ahead, with fiscal stimulus looking less likely with a genuine vaccine candidate in the pipeline. Those familiar with the virus are saying that the worst of this second wave is still ahead of us.

Below, I will look at some of the sector trend reversals and whether these reversals have room to run.

Fitness 

Working out without the luxury of a gym has been a challenging endeavor for fitness enthusiasts. Peloton (PTON - Free Report) very effectively took advantage of the homebound environment. Its sales surged in the latest two quarters by 232% and 172% year-over-year, while its bottom-line flip to strong profitability.

PTON's shares have seen parabolic returns of over 350% at its peak, but the stock is down over 15% in trading yesterday as gyms timeline to full reopening is seemingly shortened on the vaccine news.

Planet Fitness (PLNT - Free Report) , the fastest-growing health franchise the US has been struggling to keeps its shares buoyant this year. Yesterday PLNT soared over 18% in anticipation of a full reopening sooner than anticipated. 

Planet Fitness's budget gym offering is something that will have value in the post-pandemic world. Gyms that don't have the same capital flexibility as Planet Fitness have been going under left and right. The anticipated lower level of post-pandemic competition should send PLNT shares past its old highs.

I still wouldn't touch PTON at its current rich valuation, despite the recent correction. Peloton has a solid product offering, and its subscription-based workout program has been good for long-term revenue consistency. PTON was a perfect stay-at-home stock with consumer demand surging for this high-end stationary bike, but once gyms reopen, I believe that demand will subside. Its subscription offering still only makes up a small fraction of revenue, not enough to offset a decline in bike sales.

PTON vs. PLNT

Entertainment

2020's entertainment sector has been dominated by streaming services. New streaming apps are popping up left and right, with the biggest and baddest media players now in the arena.

This pandemic has pummeled movie theaters, on the other hand. Not only were theater forced to close or significantly reduce capacity, but movie releases have been all but nonexistent, and production remains hampered in the US.

Netflix (NFLX - Free Report) , the streaming king, has provided strong returns throughout 2020 as the reliance on in-home entertainment progresses. Still, the mounting competitors could inhibit NFLX's long-term growth potential if it doesn't continue producing high-quality original content. 

NFLX was down more than 8.5% yesterday, while AMC (AMC - Free Report) rallied an incredible 51% in one day as investors price out some of its 'inevitable bankruptcy' scenario. Hopes of a swift universal vaccine brought this stock out of the ashes of potential liquidation. AMC is still down 48% for the year. AMC and other movie chains may yet have a future, but they will need to further adapt to the shifting consumer that values ease and convenience above all else.

The streaming space is proliferating, and with Disney (DIS - Free Report) , AT&T (T - Free Report) , Comcast (CMCSA - Free Report) , and Apple AAPL now in the ring, this space just got a whole lot more competitive.

NFLX vs. AMC

Shopping

The rise of e-commerce and the 'retail apocalypse' really hit the fan amid this pandemic, as the world relied on digital platforms to satisfy their shopping needs. The Amazon (AMZN - Free Report) , e-com king, has driven a new generation of shoppers who don't even need to leave the comfort of their own home to buy whatever their heart desires.

Online shopping is accelerating, and the pandemic has pushed the best-in-class players to fresh share price highs.

Etsy (ETSY - Free Report) perfectly exemplifies two major trends amid the pandemic: 'do it yourself' (DIY) and a budding e-commerce platform.

ETSY had soared over 200% at its highs for the year last month, but the vaccine news hit these share square in the face dropping them down over 17% yesterday. The market is pricing out click-traffic and time spent on crafts with an end to the pandemic in-sight.

On the other hand, Nordstrom (JWN - Free Report) , who relies heavily on foot traffic, has taken a nosedive this year. With news of a vaccine relief now being in-sight, investors bid JWN shares up 26% yesterday. Foot traffic's resurging to normal levels now appears it will be sooner than anticipated. JWN remains over 60% below where it started the year.

There is no doubt that the world will be utilizing digital shopping tools more than ever before, but that does not mean that hybrid brick-and-mortar models will be obsolete. There still may be an opportunity in well-positioned retail hybrids like Nordstrom.

ETSY vs. JWN

Final Thoughts

The implications of society going back to normal are beginning to be priced into the equity market, but we all know that will not be the case. Pfizer's vaccine could rid the world of this devastating pandemic, but the post-COVID world will not be the same one we left behind in 2019. The world will emerge from this biological terror stronger than ever with technology as our ally.

The rapid digitalization we have seen across the country has illustrated how much long-term potential well-positioned tech stocks have for the next decade of advancement. The recent tech pullback may be creating a buying opportunity for your favorite COVID winners. Be careful though. Tech remains at relatively lofty levels, and the current interest rate rally gives me some concern about the sustainability of frothy valuations in tech.

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