2020 has been a wild year so far for investors.
The S&P 500 plunged 35% in February and March before gaining back nearly all of those losses, rising as much as 48% before pulling back modestly over the last couple of weeks. The recovery in the Nasdaq has been even more striking. The tech-heavy index is back at all-time highs, having crossed the 10,000 mark, and is up 12% year to date in spite of the unprecedented coronavirus crisis.
That impressive growth has been paced by a number of tech stocks that have soared in the recovery, with some more than doubling so far this year. As the chart below shows, Bill.com (NYSE:BILL), Sea Limited (NYSE:SE), and Livongo Health (NASDAQ:LVGO) have all jumped by triple digits this year.
BILL DATA BY YCHARTS
Let's look at why each of these stocks has soared and if they can keep running higher.
IMAGE SOURCE: GETTY IMAGES.
Bill.com: Cloud-based payments technology
Bill.com is the newest stock in the bunch here, as it only IPO'ed last December. The stock actually fell sharply during the initial market crash, but has recovered aggressively with the help of a strong earnings report, and the perception that SaaS stocks are well-suited to thrive during the coronavirus era.
Bill.com helps automate back-office operations for small and medium-sized businesses (SMBs), doing things like sending and receiving payments, processing invoices, and managing cash and approvals. One of the company's goals is to make paper-based manual transactions obsolete, and as over 90% of SMB's relied on paper checks as of 2016, the company has a large market opportunity. It values the addressable market for its services at $30 billion globally.
Bill.com shares pulled back during the initial market crash as investors worried about the effect of the crisis on SMBs and on high-priced growth stocks like Bill.com. However, the stock rebounded just as quickly, as shares jumped 14% on May 8 following its third-quarter earnings report. After posting 63% core revenue growth in the period, CEO Rene Lacerte said: “Our platform is mission-critical to SMBs and
we have found this to be especially true in the current work-from-home environment. We are optimistic that our purpose-built platform will resonate even more with SMBs who are now coping with the reality that the old way of managing their back-office financial operations doesn't work anymore.” The company also called for 40% core revenue growth in the current quarter, indicating that it sees few headwinds from the pandemic.
Considering the tailwinds from the work-from-home transition, Bill.com's future growth looks promising as well.
Sea Limited: E-commerce and gaming in Southeast Asia
Sea has emerged as an investor favorite this year, as the stock has several attributes that make it well-equipped to thrive during the coronavirus pandemic. It operates in digital businesses, including gaming and e-commerce, that are resistant to the effects of the pandemic, and it operates in a part of the world, Southeast Asia, that has thus far handled the outbreak well.
Sea's adjusted revenue jumped 58% in the first quarter to $913.9 million, with strong growth in both gaming and e-commerce. The company also recently rebranded its online payment platform as SeaMoney, which saw payment volume exceed $1 billion for the first time in its history, and paying users topped 10 million in the quarter.
CEO Forrest Li summed up the company's current position, saying: “The coronavirus crisis is driving a step change in the growth of the digital economy globally, materially accelerating a shift to online lifestyles that is broad, deep, and, in our view, irreversible. We believe that Sea, as a market leader in some of the key sectors of the digital economy, is gaining and will continue to gain a disproportionate share of the resulting growth in our markets.”
Sea is still significantly unprofitable as it's spending heavily on sales and marketing, with that line item taking up 44% of revenue last year. But the company is growing fast and chasing a huge market opportunity in a part of the world with more than 600 million people in island nations like the Philippines and Indonesia that can be difficult to serve through e-commerce. Those logistics challenges should strengthen its competitive advantages, and the effect of the pandemic should accelerate its growth and market share gains.
Livongo Health: Disrupting chronic disease management
Livongo is another recent IPO, debuting last July, and its shares have nearly tripled this year as investors spy a huge opportunity in this cloud-based manager of chronic diseases like diabetes.
Livongo helps patients manage such ailments through health nudges, which can be reminders to take insulin, what action to take following glucose readings, or suggestions for exercises, for example. The company's customers are employers and institutions looking to keep down insurance and other health costs, and most indicate they are overwhelmingly satisfied with the service, as it has a Net Promoter Score of 64 (on a scale of -100 to 100). On average, the company saves clients $1,908, making it a service worth using even in the middle of the pandemic, and demand for health management tools for diabetes and other chronic diseases isn't affected by the strength of the economy.
Livongo is also growing like a rocket. Revenue in the first quarter jumped 115%, and enrolled diabetes members more than doubled in the period to 328,000. Livongo also posted a small profit on an adjusted basis, showing it is quickly scaling to profitability.
Commenting on the company's position in the COVID-19 pandemic, CEO Zane Burke said: “Livongo is well positioned to provide assistance to some of the most vulnerable populations during the COVID-19 pandemic — people with chronic conditions — and our remote monitoring, digitally powered and real-time personal coaching capabilities, and access to telehealth services are well suited to track vital signs of interest in maintaining the health of our Members.”
Management even made the bold move of raising its guidance for the year, a rarity during the crisis, and Livongo should have more strong growth ahead of it as it operates in a recession-proof segment with scalable product that delivers proven cost-saving results.
Like Bill.com and Sea, Livongo looks to have a bright future ahead of it.
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