Immersion: A Next Wave Stock Market Winner
As a result of the coronavirus pandemic, life as we know it is about to get a lot more virtual. Long after COVID-19 is just a bad memory, many of the adaptations it forced upon society will still be with us.
Like all cataclysmic economic events, this one will have a very long tail and will have an enormous impact on the stock market. If you act now, you can still get in on some of the most promising investment opportunities for the next decade at bargain-basement prices.
Consider the performance of Zoom Video Communications (NSDQ: ZM), which started the year below $70 a share. On July 13, Zoom traded up to $281 for a gain of more than 300% in less than eight months.
Prior to the coronavirus outbreak, Zoom struggled to gain market share. After going public at $62 per share in April of last year, Zoom ended the year near $67. Nothing about its performance suggested it was about to take off.
Now, Zoom is considered a “no-brainer” stock to own for this year and beyond. So too are other COVID-19 beneficiaries including Netflix (NSDQ: NFLX) and Grubhub (NYSE: GRUB).
I wrote about these three stocks in early March, just as the coronavirus pandemic was gaining steam. I said then, “As is always the case, this crisis creates an opportunity for innovative entrepreneurs. Yes, there will be many losers as a result of the coronavirus but there will be some winners, too.”
In addition to those three companies, another immediate winner is online e-tailing giant Amazon.com (NSDQ: AMZN). Amazon gained 49% over the first half of the year and added another 9% during the first two weeks of July.
The Next Wave
Okay, so we know who the immediate winners are from the coronavirus pandemic. Now, it’s time to start thinking about some of the less obvious names that will emerge as “next wave” winners.
One company that intrigues me is Immersion (NSDQ: IMMR), which specializes in haptic technologies. Haptic technologies provide a sense of feel to computer interactions by using vibrations and other sensory inputs. [Disclosure: I own Immersion in my personal account]
Until recently, haptics was regarded as a subset of video gaming technology. Instead of just seeing an enemy’s tank blow up you can feel it shake the ground, too. Gaming still accounts for a huge portion of Immersion’s revenue stream. The company’s CEO, Ramzi Haidamus, included this statement in the press release announcing Immersion’s Q1 results on May 7:
“We remain confident in our strategy and are focused on executing across the opportunities to unlock Immersion’s full profit and growth potential, such as with the anticipated launch later this year of the PlayStation 5 console leveraging Sony’s license of Immersion’s haptic technology for gaming and VR controllers.”
To be sure, a lot more people are gaming these days while stuck at home. But I believe the coronavirus pandemic will greatly extend Immersion’s reach into a wide variety of other remote experiences including online shopping, video conferencing, and social networking.
As popular as Zoom video conferencing has become, the experience is still fairly primitive by technology standards. You sit in your chair looking at a bunch of other people staring at you, too. It is a completely two-dimensional experience devoid of depth and feel.
The same is true for online shopping and social networking. Imagine how much richer those experiences would be if you could feel a wave crash on the beach when you are watching your friend’s video of their Hawaiian vacation.
The timing couldn’t be better for Immersion. The coronavirus pandemic is forcing a more virtual lifestyle on us. At the same time, the build-out of a nationwide 5G (fifth generation) wireless communications network is nearly complete.
Last week, I discussed an exchange-traded fund that owns 5G stocks that has underperformed the tech sector over the past twelve months. That’s a good way to participate in the 5G revolution if you aren’t comfortable picking individual stocks.
I don’t think the stock market has latched on to Immersion’s potential yet. Over the past 12 months, IMMR fell by 15% while the NASDAQ Composite gained 28%. That is some pretty serious underperformance.
I believe all that is about to change, perhaps as early as next month. Sometime during the first half of August, Immersion should release its Q2 results. I don’t expect those numbers to blow away Wall Street. However, the company could provide guidance based on expectations for new markets that thus far have not figured into Immersion’s operating results.
It’s likely that many companies will be revising forward guidance based on the impact 5G will have on their revenue streams. My colleague, Dr. Stephen Leeb, has a very good idea as to who many of them will be.
In fact, Dr. Leeb and his investment team have pinpointed one small technology company instrumental to 5G. It’s a largely unknown but vitally important innovator and it’s poised to soar in tandem with 5G’s global implementation. Click here for details.