3 Stocks That May Get Hit by the Coronavirus Outbreak

Over the last few weeks, there has been growing alarm over the rapid spread of a new virus (now termed the “novel coronavirus”), which originated from Wuhan, China. With the total number of infections passing above 20,000 in China along with more than 400 deaths (at the time of writing), this disease seems to be spreading fast.

Many countries, including the U.S., Australia, and New Zealand, have banned foreign nationals from entering if they have visited China recently, while other countries…

bordering China have slammed their land borders shut in an attempt to contain the spread of this new virus. The World Health Organization (WHO) has declared the novel coronavirus a global health emergency and acknowledged the escalating health threats the virus poses.

While it may sound like a really good idea to jump into healthcare stocks right now, there are other industries that are being badly impacted by this outbreak. Here are three businesses that may get badly hit if the disease is not controlled and contained soon.

1. Disney

Disney (NYSE:DIS) operates its theme parks in many parts of the world, including Shanghai and Hong Kong. In late January, the company had to temporarily shut both its theme parks due to escalating concerns over the virus spreading uncontrollably. To be fair, Disney is not the only theme park operator that has been negatively impacted by this virus outbreak — others have also temporarily ceased operations. No dates have been set as to when Disney’s theme parks will reopen again.

This closure comes at a bad time for Disney, as the company expects a surge in tourism around the Lunar New Year holiday. Though Disney does not break down the two theme parks’ revenue and operating income contributions, a quick look at the recent FY 2019 earnings report shows that the theme parks and resorts division contributed around 37% of total revenue and 45.5% of total operating income. The hit to Disney’s financials for FY 2020 may, therefore, be fairly substantial.

2. Starbucks

Starbucks (NASDAQ:SBUX) has been rapidly expanding its presence in China. The company that revolutionized handcrafted coffee has been rapidly growing in the world’s most populous nation. At the end of FY 2017, the company had just 1,540 stores. This number more than doubled to 3,521 stores by the end of FY 2018 and has grown to 4,292 stores by the end of the first quarter of FY 2020, up 16% year over year. Revenue from China’s stores made up a significant 10.5% of total group revenue for the quarter, while the year-over-year growth in revenue was 13%.

Due to the rapid spread of the coronavirus, Starbucks closed more than 2,000 locations in China. If the situation worsens, many more stores may end up being shuttered temporarily, and at this point, it’s hard to say when the situation will return to normalcy.

In the recent earnings call, CEO Kevin Johnson mentioned that the company will not be providing any guidance at this time due to the dynamic and…

Continue reading at THE MOTLEY FOOL



Leave a Reply

Your email address will not be published.