Technology stocks and ETFs have been the star performers of this year. Instead of taking the shine out of it, the coronavirus outbreak has added more to the sector. Social distancing norms enacted globally to mitigate the spread of the virus compelled people to stay at home, binge on online shopping and work as well as learn from home.
Fears for Second Wave of Contagion Ensure Remote Working
Though many corners of the global economy have reopened, the trend for work-and-learn-from home should stay strong. This is especially true given that the second wave of contagion is rife. New coronavirus cases in Florida surged to the highest level since the pandemic began, and Texas’s hospitalization rate surged the most since the beginning of the month, as of Jun 17. Other states including Arizona, Nevada and Oregon also recorded increases in cases.
Naturally, this points to the requirement of prolonged work-from-home as well as the steady run of the tech companies. Twitter (TWTR - Free Report) has indicated that its employees may opt for permanent work-from-home. Visa (V - Free Report) CEO expects the majority of company's employees to work from home for the rest of 2020.
Microsoft (MSFT - Free Report) recently stated that it has expanded its network and data center capacity to meet the growing demand for cloud services amid the ongoing coronavirus pandemic. The company’s Azure and Office cloud offerings have witnessed a surge in demand amid the work-from-home trend.
Big Tech Into Virus-Testing & Tracing Business
If this was not enough, big tech companies are now eyeing the virus testing market. Verily Life Sciences, a sister company of Google, hurried to introduce a free coronavirus-screening site for the public and set up testing locations in March. It has helped more than 220,000 people get tested in 13 states till now. The company is now launching a health screening and analytics service for businesses trying to safely reopen during the pandemic.
Kogniz, an artificial intelligence start-up, is marketing thermal camera systems as coronavirus fever-screening and “social-distancing enforcement” tools for the workplace. Microsoft and the large insurer UnitedHealth Group (UNH) joined forces on a free symptom-checking app. Fitbit launched a program that includes a daily symptom-checking app for employees and a work force health-monitoring dashboard for employers.
The United Kingdom is dumping the way its current coronavirus-tracing app works and shifting to a model based on technology provided by Apple (AAPL - Free Report) and Google. The government now looks to launch an app in fall; however, it says the product may not involve contact tracing at that point. Notably, contact-tracing apps are designed to avert a second wave of the coronavirus.
Overall, the pandemic will continue to boost various corners of the technology sector, ranging from enterprise cloud computing, cyber security, remote communications, video gaming and e-commerce to online payments.
Decent Fundamentals Amid Extremely Downbeat S&P 500 Earnings
Tech earnings are up 3.8% on 4.0% higher revenues in Q1. This is in contrast to a 43.7% slump in the S&P 500 earnings on 0.1% decline in revenues. The technology sector is among the very few outperformers in the otherwise-downbeat earnings trends.
ETFs in Focus
Against this backdrop, we highlight below a few technology ETFs that revolver around big tech stocks and also have a solid Zacks Ranks (read: Missed the Big Five Tech Rally? Buy the Dip With These ETFs).
Technology Select Sector SPDR ETF (XLK - Free Report) – Zacks Rank #1 (Strong Buy)
Vanguard Information Technology ETF (VGT - Free Report) – Zacks Rank #1
iShares U.S. Technology ETF (IYW - Free Report) – Zacks Rank #1
SPDR SP Software Services ETF (XSW - Free Report) – Zacks Rank #1
Fidelity MSCI Information Technology Index ETF (FTEC - Free Report) – Zacks Rank #1
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