Originally, COVID-19, the respiratory disease caused by the coronavirus, was a bit like the trade war: A market-moving catalyst that Wall Street seemed to ascribe more or less importance to on a daily basis.
The early stages of China’s coronavirus outbreak sparked some degree of fear on Wall Street. Then, markets essentially ignored the deadly virus even as it spread globally. By late February, investors had graduated from the denial phase; the S&P 500 suffered its fastest-ever 10% decline as the impact of the virus on the global economy was finally acknowledged in prices.
Today, the ides of March are right around the corner and volatility is essentially a feature of the markets. On March 9, stocks quickly lost more than 7%, triggering the rarely needed circuit-breaker rule, with all trading halted for 15 minutes. Whether the brunt of the sell-off is behind us or not, there are certainly still a number of coronavirus stocks that are being materially hit by the viral outbreak. The virus, which first appeared in Wuhan, China in late 2019, is a close cousin to the severe acute respiratory syndrome, commonly known as SARS.
Although there are a handful of stocks that could benefit from coronavirus, it’s equally important for the average investor to be cognizant of stocks hurt by the coronavirus.
By no means are the following companies an all-encompassing list. But hopefully it gives investors an idea of the most at-risk parts of the market. Keep in mind that a number of these names are likely to be extremely volatile, and due to large declines, they can also be more likely to enjoy short-term rallies when markets discount the impact of COVID-19’s spread. All the same, these underlying businesses are vulnerable to the outbreak.
From household names to overseas firms, what follows are a handful of businesses feeling the pain as the impact of the coronavirus ripples throughout the global economy.
“Gaming companies, travel companies and retail have all pulled back,” says Raj Gupta, executive director and research analyst for William O’Neil + Co., who highlights a few affected industries.
“We can expect companies to discuss the impact of the virus on earnings growth as earnings season progresses,” Gupta says.
Here are five stocks most affected adversely by the coronavirus:
— Carnival Corp. (ticker: CCL)
— Wynn Resorts (WYNN)
— Yum China Holdings (YUMC)
— United Airlines Holdings (UAL)
— Nike (NKE)
Carnival Corp. (CCL)
Diamond Princess, a cruise ship owned and operated by Princess Cruises, which is in turn owned by Carnival, was quarantined for weeks, parked at a dock just off of Japan after one of its former passengers tested positive for coronavirus. And now, there’s yet another cruise ship outbreak on the Grand Princess, a Carnival vessel docked in Oakland, California, with thousands of passengers on board. The cruise ship did unload several hundred people on Monday after nearly a dozen on board tested positive for COVID-19.
Down 55% year-to-date through March 10, CCL stock has been punished by the markets as the unfortunate situation has developed. Cratering demand for cruises has only compounded an already bad scenario.
Wynn Resorts (WYNN)
Gambling giant Wynn Resorts is also one of the coronavirus stocks suffering financially from the outbreak. Once synonymous with Las Vegas, Wynn and other big-name gaming players have shifted their core businesses to China’s Macao territory, which quickly became a gambling haven and now does about seven times more business than Vegas.
So it hurts when the government makes every Macao casino shut down, even if it’s for a few weeks. That’s what happened to the industry in February, and while the government allowed casinos to come back online in phases, gaming revenue in the gambling haven still cratered an incredible 88% in February.
Wynn Resorts was “losing $2.6 million a day” when casinos were shut down, says Kevin Koehler, associate portfolio manager at Miracle Mile Advisors.
Wynn, as well as many of its competitors, has felt the swift wrath of Wall Street.
The stock is now down about 45% from its peak.
Yum China Holdings (YUMC)
Yum China, which owns fast-food chains like KFC, Pizza Hut and Taco Bell, is down about 10% year-to-date in 2020. It turns out quarantining tens of millions of Chinese citizens isn’t good news for its businesses.
It’s no shock that a company with the word “China” in its name might be impacted more by coronavirus than the average U.S. stock, but it is alarming to fathom just how material this viral scare — which still only affects a small segment of China’s population — can be to a near $20 billion company.
“Thirty percent of their stores have already shut down, which will undoubtedly hurt the company’s forecasted revenue going forward,” Koehler says. The last news from the company on this topic came in early February when the company said it wasn’t sure when those stores would reopen.
All things considered, YUMC stock’s 10% year-to-date slump seems like a modest setback for all the uncertainty surrounding COVID-19 and its spread in China.
United Airlines Holdings (UAL)
Needless to say, the travel industry is going to suffer anytime a pandemic is brewing. Quarantines in China and a total lockdown in Italy will naturally limit United’s international flights, but widespread cancellations of conferences, concerts and other events are also eating into demand for air travel.
On top of that, an airline cabin surrounded by strangers is arguably one of the last places most cautious people want to find themselves as a temporarily symptomless disease rampages across the world. The result? Through March 10, UAL stock is down a whopping 43% year-to-date. Along with rivals Delta Air Lines ( DAL) and American Airlines ( AAL), United is canceling flight change and cancellation fees for new March bookings.
One reason UAL is in a slightly worse position than other major airlines is its debt load, which is higher than both Delta and American, with a debt-to-equity ratio of 1.29.
Last and certainly not least by market cap, the roughly $137 billion Nike is an example of how retailers, and even globally formidable retailers, can be hit by a black swan event like the coronavirus.
“Nike has temporarily closed about half of (its) company-owned stores and stores managed by partners in China,” Gupta says. “The stores that are open are operating under reduced hours and have seen reductions in foot traffic. There’s no timetable for the closures and reduced hours.” This has ostensibly been the case since Nike first announced these measures in a press release on Feb. 4. Since then, the company hasn’t released any updates on this situation.
About 17% of Nike’s revenue comes from China, which is also its fastest-growing region, Gupta says, noting that China produces about 20% of Nike’s products as well.
In early March more developments arose, as the company temporarily closed both its global headquarters in Beaverton, Oregon, and its European headquarters in the Netherlands. The first was done out of what the company called “an abundance of caution,” while the second was done after one of the company’s workers came down with COVID-19.
While the situation seems to be calming down, the coronavirus remains a major strain on the global economy. Under Armour ( UA, UAA) issued a soft 2020 outlook in mid-February, in part due to the infamous outbreak. It reflects just how sensitive today’s interconnected economy is, and how U.S. investors need to keep apprised of global events when making portfolio decisions.
It’s unclear just how large this outbreak’s impact on the global economy will be, but recent market volatility clearly shows fear levels are elevated. While risks may have been overestimated in some stocks, this ordeal isn’t over yet — and it’s not quite clear when it will be.
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Update 03/10/20: This story was published at an earlier date and has been updated with new information.