The first two articles of this series were all doom and gloom, whereas this article is mostly doom and gloom – a notable improvement!
Just about every company in the world has been impacted to a greater or lesser extent by COVID-19. The unprecedented tanking of the global economy has seen most companies losing revenue, but there have been notable and spectacular exceptions.
Companies can be divided into four broad categories, based on the immediate effect on their revenues.
Winners: Companies with a revenue increase
These are few and far between but there are some stellar examples, such as video conferencing and online productivity platforms like Zoom, Cisco Webex and Slack. Since late January, Zoom’s market cap has more than doubled to US$35 billion. Other winners include online commerce businesses. Amazon founder Jeff Bezos, already the world’s richest man, added a lazy US$24 billion to his net worth so far this year to take his fortune to US$139 billion.
“Small” losers: Companies with a revenue decrease up to 20%
These are companies impacted not because of the nature of their business, but only because of the general downturn in economic activity. Companies selling the necessities of life fall into this category – essential consumer goods like groceries, basic clothing and utilities.
“Big” losers: Companies with a revenue decrease of 20% to 50%
It’s bad for these companies, but it’s likely to quickly turn around once the global lockdowns end. Oil and gas companies are a good example. With a third of humanity essentially sheltering in place, global transportation is way down, but should bounce back quite fast.
“Catastophic” losers: Companies with a revenue decrease of more than 50%
The so-called “BEACH” stocks – booking, entertainment/live events, airlines, casinos/cruises and hotels. The very nature of the product is anathema to a post-covid world. They involve travel or gathering in crowds – often both. These are the very two things governments and health professionals have been incessantly pleading with us or forcing us to avoid though social distancing, aircraft groundings and border closures. The message has been clear: travelling and crowds are dangerous, even deadly. This message won’t be unlearnt or forgotten overnight.
IRs are a mix of casinos, hotels and entertainment. All three are BEACH products, so it’s a perfect storm. We have a long, slow recovery ahead.
But I can hear the plaintive cries now: “What about pent-up demand?! What about all those cabin-fevered wannabe tourists who will come streaming in just as soon as we re-open?” Sure, there will be an element of that for a few weeks, but overall visitation will only consistently return to 2019 levels once (a) the economy recovers and (b) the fear of the virus is (mostly) gone.
But there is light at the end of this long dark tunnel. Humans are gregarious, outgoing, social creatures who love to play. The happy days will undoubtedly return – just not soon.
Previous in series: POST-COVID2: The most transformative business shock of our lifetimes
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