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Internet analyst sees permanent tailwind from lengthy lockdowns

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Internet companies are likely to be long-term winners from the pandemic as lockdown measures have now lasted long enough for changes in consumer behavior to become permanent, according to Credit Suisse.

“It takes 66 days for a change in behavior to turn into a habit,” and “we are now well into the time frame for consumer behaviors learned during quarantine to become lasting habits,” the firm wrote.

Analyst Stephen Ju singled out social-media companies as among those that would likely benefit from this tailwind, echoing a growing consensus that has been made elsewhere about e-commerce names.

As part of its call, Credit Suisse raised its price targets on Facebook, Snap, Pinterest, and Google-parent Alphabet, all of which derive most of their revenue from digital advertising.

“One of the biggest questions facing investors is ‘will it stick’ in terms of app engagement” and online purchasing behavior, the firm wrote. The length of the lockdown is “a clear signal that the acceleration in queries, time spent, and e-commerce purchasing should be growing and hopefully accelerating from a higher baseline.” The firm cited a Google Cloud Next session for the statistic about 66 days.

The First Trust Dow Jones Internet Index Fund, an exchange-traded fund that tracks Internet stocks, is up more than 30% in 2020. The S&P 500 is higher by less than 1%.

Credit Suisse’s comments mirror a recent report from Jefferies about e-commerce stocks. “Behavioral changes brought about by the pandemic have permanently increased online consumption,” the firm wrote, adding that e-commerce traffic “has remained robust even after states began reopening.”

Earlier this month, Bloomberg Intelligence calculated that the penetration of digital U.S. retail sales “could double by 2024,” a trend accelerated by coronavirus-related store closings. Citi also expects online retail will continue to gain share. While total U.S. retail sales “are expected to be only 1% above 2019 levels” in 2022, “e-commerce is expected to increase 43%,” while brick-and-mortar retail falls 4%, the firm wrote, citing eMarketer forecasts.





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