What happened
Shares of Zoom Video Communications (NASDAQ: ZM) climbed 5.7% on Friday, as investors rotated into stocks positioned to perform relatively well during a resurgence of COVID-19.
So what
The discovery of a new coronavirus strain sparked a violent sell-off in the financial markets. Health officials are worried that the heavily mutated variant, which is referred to as B.1.1.529, could be highly contagious. They also don't know if currently available vaccines will be able to provide adequate protection against it.
Government leaders in the U.S., Europe, and Asia acted swiftly to restrict travel to and from South Africa and other African countries. The actions are designed to slow the spread of the new coronavirus variant. However, due to the global nature of international trade, it might only be some time before the strain spreads across the world.
Image source: Getty Images.
Now what
The news drove investors to sell off the stocks of companies that are viewed as economic reopening plays -- and rotate back into businesses that could see demand for their products and services rise if COVID-19 cases mount. Zoom, as a leading provider of video conferencing and other communications software, stands to benefit from this unfortunate scenario.
After soaring during the early stages of the pandemic, Zoom's growth has slowed in recent quarters, as more people have returned to their traditional work locations. The company's revenue growth decelerated to a still rather impressive 35% in its fiscal 2022 third quarter, down from the stunning 367% growth it enjoyed in the prior-year period.
Although Zoom's pace of expansion will likely not return to those heady levels, a surge in COVID-19 case counts could help its revenue and profits increase at a higher-than-expected rate in the coming quarters.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
