Stay-at-home stocks are the talk of the Street.
JPMorgan analysts raised their share price and revenue estimates for Amazon and Netflix on Wednesday, naming Amazon and Facebook their top stock picks in this historically volatile market. Ebay, Chewy, Peloton, Chegg and Spotify were among the other names highlighted in the note, which called e-commerce and subscription-based businesses as market “bright spots.”
They also slashed estimates for online travel and ride-sharing companies including Booking Holdings, Expedia, Uber and Lyft.
One of JPMorgan’s picks is particularly showing signs of relative strength, JC O’Hara, chief market technician at MKM Partners, said Wednesday on CNBC’s “Trading Nation.”
“The theme of stay-at-home stocks makes perfect sense in this environment,” O’Hara said. “We think Amazon makes sense on so many different levels, but the most important thing for us is price action.”
Of note to O’Hara was Amazon’s relative outperformance in recent weeks. The stock has fallen 16% since the market’s Feb. 20 peak, while the S&P 500 is down more than 29% over that time frame.
“It’s a relative winner, but we don’t want to buy a stock just because it’s down less than the market. We want to buy it because it has positive price action,” O’Hara said, citing the stock’s 9% climb just since Friday. “This is some of the momentum that we think will continue.”
In addition to that upside momentum — which he noted was “rare” in this market — O’Hara pointed to the stock’s strong technical support levels.
“The fact that it bounced so nicely off that key support in that 1,550, 1,600 area, with good volume, too, we still think there’s another 10% upside to 2,000 for Amazon here,” he said.
John Petrides, portfolio manager in the wealth division of Tocqueville Asset Management, agreed that “this theme of working remotely, working from home, living from home, keeping socially distant but … embracing social media, is going to be here to stay for a long time.”
As huge swaths of consumers get used to their new, home-bound daily lives, a number of industries could directly or tangentially benefit, Petrides said in the same “Trading Nation” interview.
“The idea of e-gaming is going to pick up more steam here. It’s not just Netflix. Think of all the other online distributors of content like NBC and AT&T and Disney+. That’s all here to stay,” he said. “All these services that allow you to function as normal of a lifestyle as you possibly can within the confines of your house are going to be here to stay for quite some time.”
More at-risk companies will have to adapt, the wealth manager said.
“Companies are going to adapt,” he said. “We’re in an environment where disruption and adaptation is probably the most rapid and easiest that it’s ever been in the history of mankind, and the technology that we have at our fingertips allows us to do that. And because capitalism allows us to seek profitability, people are going to find an opportunity when there is one.”
Stocks continued their volatility-ridden plunge Wednesday, with the Dow Jones Industrial Average closing below 20,000 for the first time since February 2017.
Disclosure: Tocqueville Asset Management owns shares of Amazon and Facebook. Additionally, NBC and CNBC are owned by Comcast’s NBCUniversal unit.