Cisco, CVS, Merck: Coronavirus Stocks Gone Bad

+10.54%
Upside
79.76
Market
88.17
Trefis
CVS: CVS Health logo
CVS
CVS Health

If you were able to predict earlier this year that dark coronavirus clouds were going to be all over the planet, wouldn’t it make sense to double down on the stocks of the largest drug companies, pharmacy outlets as well as big networking and computing companies? Turns out, nearly nine months later, many of these stocks – including CVS (NYSE:CVS), Merck (MRK), Intel (NADSDAQ:INTC), and Cisco (NASDAQ:CSCO) – haven’t fared too well, as investors opted for higher-growth names. In our indicative theme Covid-19 Stocks Gone Bad, we’ve picked high-profile stocks that have largely underperformed through Covid-19 but could still stand to gain in the medium to long-term. The theme remains down by about -14% YTD versus a gain of about 3% for the S&P 500.

Merck ($215 billion market cap, -5% YTD) has seen its stock lag as a postponement of elective surgeries, and fewer visits to doctors impacted pharmaceutical demand. However, things should get better for the company with both revenues and earnings poised to grow for the full year, led by the continued expansion of its blockbuster immuno-oncology drug Keytruda, and the opening up of the economy, which should aid the overall business growth.

MRK

Relevant Articles
  1. Should You Pick CVS Stock At $75 After A 6% Fall This Year?
  2. Is CVS Health Stock Undervalued At $70?
  3. Will CVS Health Stock Recover To Its Pre-Inflation Shock Highs of $110?
  4. Higher Costs To Weigh On CVS Health’s Q2?
  5. Should You Buy CVS Stock At $70?
  6. Will CVS Stock Rise Post Q1?

Johnson & Johnson ($395 billion market cap, 4% YTD) much like Merck, demand for Johnson & Johnson was also impacted by the postponement of elective surgeries, and fewer visits to doctors. However, the company should see upside as the economy opens up and potentially from its Covid-19 vaccine, which is currently in clinical trials. (related Should You Pick Merck Over Johnson & Johnson?)

Intel ($211 billion market cap, -16% YTD), one of the largest processor vendors has been out of favor with investors on account of increasing competition from lower-cost ARM-based chipsets and a delay in the rollout of its next-generation 7nm chips. However, Intel looks like good value considering its large base of existing customers, who rely on Intel processors and are likely averse to switching and also due to its vast marketing and distribution footprint.

Cisco ($170 billion market cap, -15% YTD), one of the largest network equipment providers, has also underperformed the market as it has struggled with top-line and bottom-line growth. However, the increasing digitization caused by the Covid-19 pandemic could eventually drive demand for connectivity, in turn improving sales of Cisco’s networking software, and products such as switches and routers.

CVS Health ($78 billion market cap, -18% YTD) is a major healthcare company that operates CVS Pharmacy, CVS Caremark, a pharmacy benefits manager, Aetna, a health insurance provider, and other healthcare brands. Although the company posted strong Q2 earnings, driven by temporarily lower costs at its insurance business and higher sales at retail stores, the stock has underperformed due to risks related to its acquisition of Aetna and uncertainties related to the upcoming presidential elections.

What if you’re looking for a more balanced portfolio instead? Here’s a top-quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500, Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk. It has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Team