NEW digital behaviors adopted by consumers and businesses during the coronavirus crisis are expected to linger after the pandemic, accelerating the long-term growth of the technology sector, the Franklin Equity Group said.
“People and businesses have learned new digital skills and found that many of these experiences are passable. We believe many behaviors have permanently changed,” Franklin Equity Group Vice-President and Portfolio Manager Jonathan Curtis said in a virtual conference Tuesday.
He also noted that businesses and consumers will continue to utilize many of the new digital services they discovered during the crisis.
“This will compel digital laggards to invest in their own transformation and could help to accelerate digital transformation in the years ahead,” Mr. Curtis said.
Before the crisis, he said, the information and communications technology sector was already performing well due to a combination of “secular digital transformation growth; good quality, highly profitable businesses with strong balance sheets; and reasonable valuations.”
The government-imposed lockdowns in most countries had tested resilience across all industries, but digital transformation leaders “were more agile than their non-digital peers as they quickly pivoted… with work from home, educate from home, shop from home, health care from home, exercise from home, socialize from home, and dine out from home solutions,” Mr. Curtis said.
“We believe that social distancing will continue even as lockdowns are lifted, keeping many of these new digital skills, services and revised digital business processes highly relevant,” he added.
Once the crisis is over, Mr. Curtis said, a “very powerful acceleration” in tech revenue growth is expected.
Among the companies that responded to the new landscape brought about by the pandemic are Google, Apple, GitLab, and Atlassian.
“They have moved their sales conferences to online formats and are learning how to close deals over Zoom meetings,” Mr. Curtis noted.
Exercise equipment and media company Peloton saw “significant demand and has opened its digital app offering to new users,” he added.
Nike, a sportswear company, has also been offering digital workout classes.
With the surge in demand for entertainment, both Netflix and Youtube had to reduce their bit rates to protect local access to networks.
Gaming entertainment services like Amazon’s Twitch also saw “very strong demand” during the crisis, Mr. Curtis said. — Arjay L. Balinbin