Video conferencing stocks are bucking the downward tide, gaining ground in reaction to businesses all over the world restricting employee travel in response to the coronavirus outbreak. Market players and armchair technicians are placing bets that the travel prohibition will translate into windfall profits that last two quarters at a minimum. More importantly, current events could signal a paradigm shift in which corporations stay at home permanently.
Indeed, these issues could enjoy a perfect storm when executives realize that virtual venues offer the benefits of face-to-face business transactions at a fraction of the cost, allowing them to bring down budgets during a belt-tightening period that lasts far longer than the outbreak. In addition, company bean counters could recommend suspending business travel entirely after the crisis ends, pocketing the capital while touting the contribution to the fight against global warming.
Greta Thunberg and other climate activists have focused their wrath on the airline industry in recent months, warning that the industry's outsized contribution to carbon pollution is contributing to climate change. Activists have demanded a radical reduction in airplane travel, which businesses around the world are doing right now, but for other reasons. The two approaches could dovetail during this decade, providing the benefit of lower emissions without the need for major disruption.
Slack Technologies, Inc. (WORK) came public at $38.50 in June 2019 and entered a steep downtrend that posted an all-time low at $19.53 in November. A successful January retest set the stage for an uptick that stalled near $30 on Feb. 21. A March 5 breakout attempt failed, reinforcing a trading range that needs to hold support near the 50-day exponential moving average (EMA) at $24.75. This is a great stock to watch even if support fails this week as market players dissect the long-term implications of the business travel ban.
Teladoc Health, Inc. (TDOC) is in the right place at the right time with a virtual medical diagnostic service. Investors have taken notice, triggering a breakout above the October 2018 high at $85.40 in January 2020. The stock has gained nearly 50 points since that time, so this isn't a cheap play, but it's hard to forecast a fair value, given the rapid expansion of the outbreak. A pullback to the red trendline near $120 may be all that's needed to establish a profitable position.
Nasdaq 100 component Citrix Systems, Inc. (CTXS) topped out at $117 in July 2018 after a long uptrend and broke out above that level in January 2020, hitting an all-time high at $130.55. It sold off into the third week of February with other tech stocks, dropping to a four-month low near $100. Citrix stock turned higher last week after a flood of travel restrictions and traded back to the 50-day EMA in Friday's session. Basing action on top of the 200-day EMA at $108 could set the stage for a more forceful recovery wave.
Atlassian Corporation Plc (TEAM) stock topped out at $149.80 in July 2019 after a long-term uptrend and sold off to $107 in October. The subsequent recovery wave completed a round trip into the prior high in mid-January, generating rapid whipsaws across the breakout level. That volatility has persisted into March, with bears now holding a modest advance. A decline into the 200-day EMA at $128 could be rewarding with this price structure, with a potential bounce that completes the breakout.
The Bottom Line
Video conferencing stocks are in rally mode or treading water while the broad market sells off, highlighting relative strength in reaction to corporate travel bans that could last for months or longer. It's even possible that the restrictions will signal a paradigm shift in which corporations adopt virtual applications on a permanent basis.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.