coca cola stock – – Tradingsim

Though they may seem inconsequential to some investors, dividend stocks are pivotal to building a portfolio to increase wealth despite the previous bear market in this economy changed by the coronavirus. This TradingSim article will help investors find the best dividend stocks of 2020 to buy and hold in order to rebalance their portfolios. This article will also help investors determine the best stocks to help them improve their investment strategies.

What are dividend stocks?

Dividend stocks are shares from corporations that offer extra payouts every quarter to investors. With many dividend stocks, investors can purchase low-risk value stocks. With companies giving dividends, corporations pay investors in shares instead of cash.

How are dividend stocks beneficial to investors?

Because they offer tax benefits, corporations that offer dividends are beneficial to investors. With corporations offering dividends, the IRS doesn’t usually collect capital gains taxes. The IRS doesn’t collect capital gains taxes unless investors sell the shares at a profit. In addition to that tax advantage, corporations with dividends have special tax perks.

If an investor buys stock before the reinvestment date, there is a benefit. That benefit increases if investors keep the stock for 60 days. If an investor holds a stock for two months or longer, the IRS treats the dividend as a qualified dividend. In that case, the IRS taxes the dividends at low tax rates between 5-15%.

If investors are looking for the best stocks that offer dividends, here are 10 of the top choices for investors.

1. AT&T

AT&T is one of the best dividend stocks of 2020

If investors are looking for the best companies offering dividends, AT&T (NYSE:T) is a good choice. Because the company has been around for over a century, AT&T’s dividend yield of 6% is great for investors.

The telecommunication’s stock is a dividend aristocrat. With dividend aristocrats, investors are buying stocks that consistently pay high dividends to investors for at least 25 years. Because AT&T is a dividend aristocrat, the company is a great dividend stock in 2020 and beyond.

AT&T Q2 2020 earnings deliver strong results

In addition to strong dividends, the telecommunications giant also had a robust Q2 earnings report. AT&T reported revenue of $41 billion. In the last quarter, The company’s profits took a hit. AT&T’s revenue slightly dropped because its movie division was stalled during the nationwide quarantine. Even though profits were down, they still beat Wall Street expectations. John Stankey, the company’s CEO, spoke about the results.

“Our solid execution and focus in a challenging environment delivered significant progress in the quarter, most notably the successful launch of HBO Max, resilient free cash flow and a strengthened balance sheet,” said Stankey.

The chief executive officer also spoke about AT&T’s positive cash flow.

“Our resilient cash from operations continues to support investments in growth areas, dividend payments and debt retirement. We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” added Stankey.

AT&T chief financial officer John Stephens also touted the success of its HBO Max streaming service.

“One month after launch, HBO Max had about 3 million retail subscribers. 4.1 million subscribers had ‘activated’ their Max account. Of those, more than 1 million are wholesale subscribers through AT&T,” said Stephens.

AT&T stock gets buy ratings from analysts as one of the best dividend stocks of 2020

Even though AT&T’s Q2 2020 revenue beat expectations, two different financial analysts have different takes on the stock. Bernstein analyst Peter Supino said that AT&T stock is a buy because of its increased mobile service during COVID-19.

“Critically, mobility service revenues, adjusted for roaming, grew by more than 1%,” noted Supino.

Morningstar analyst Mike Hodel also rates AT&T as one of the best dividend stocks for 2020 and beyond.

“Looking at AT&T’s businesses individually, we believe the firm still deserves a narrow moat based primarily on cost advantages within the wireless business and intangible assets acquired with Time Warner. These advantages should enable the firm to maintain relationships with customers and increase free cash flow,” said Hodel.

Some analysts see AT&T as a weaker dividend stock

While Peter Supino rates AT&T stock a buy, other analysts are bearish on the telecom company’s site. MoffettNathanson analyst Craig Moffett wrote in a note to clients that he is skeptical that AT&T can compete with other wireless companies.

“Their loss of postpaid phone subscribers owes, in part, to the necessity of prioritizing free cash flow over growth in order to mitigate the weakness in their media and wireline businesses. And, perhaps more importantly, it is unclear whether AT&T has the balance sheet to vigorously compete in the FCC’s upcoming auctions for mid-band spectrum,” wrote Moffett.

Even though analysts are split on whether to buy AT&T stock, the company’s strong dividend makes the stock a good long-term buy for investors.

2. Microsoft

Microsoft stock is one of the best dividend stocks for investors

In addition to AT&T, tech giant Microsoft (NASDAQ:MSFT) has one of the best dividend stocks of 2020 for investors. Microsoft’s dividend yield is small at 1%, but offers a robust dividend. In addition to a reliable dividend, Microsoft’s last earnings report was better-than-expected as well.

Microsoft has positive Q3 2020 earnings as one of the best dividend stocks

In its Q3 2020 earnings report, Microsoft had a strong Q3 2020 earnings report. The company’s CEO Satya Nadella, spoke about the positive results.

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning to sales and customer service to critical cloud infrastructure and security — we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything. Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead,” said Nadella in a statement.

Microsoft’s quarterly revenue grew to $35 billion. The corporation’s revenue increased because of “cloud usage increased, particularly in Microsoft 365, including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform, as customers shifted to work and learn from home”, noted Microsoft in its earnings report.

Microsoft is a buy for some financial experts

Wedbush analyst Dan Ives noted that Microsoft stock is a buy because of its successful cloud technology. He also thinks that the tech company is benefiting from many workers working more from home.

He also noted “this current remote work from home (WFH) environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft the main beneficiary as evidenced by the solid results.”

“In a nutshell, Nadella & Co. continue to lead a transformational cloud story narrowing the gap vs. Bezos and AWS into 2021,” added Ives.

Amana Mutual Funds also is bullish on Microsoft stock because of its cloud technology.

“Microsoft has done an excellent job building its Azure cloud services business, while we believe a strong period of semiconductor demand will arrive in the new decade supporting Microchip and Taiwan Semiconductor. Whether the rally starts in 2020 or 2021 remains to be seen but recent signs have been positive.”

Because of Microsoft’s strong Q3 2020 results and bullish analysis from experts, Microsoft has a dividend stock that investors should choose.

3. Johnson & Johnson

Like AT&T, Johnson & Johnson (NYSE:JNJ) is another high-yield dividend aristocrat that is a good choice for investors. The company’s dividend yield is a healthy 2.76%.

The healthcare company overcame controversy for allegedly producing toxic baby powder. The corporation is moving beyond that tumultuous period as the corporation develops a COVID-19 vaccine.

Paul Stoffels, M.D., Vice Chairman of the Executive Committee and Chief Scientific Officer, is supervising the project. He spoke about the potential treatment in a statement.

“We are excited to see these pre-clinical data because they show our SARS-CoV-2 vaccine candidate generated a strong antibody response and provided protection with a single dose. The findings give us confidence as we progress our vaccine development and upscale manufacturing in parallel, having initiated a Phase 1/2a trial in July with the intention to move into a Phase 3 trial in September,” said Stoffels.

Johnson & Johnson is a top dividend stock in 2020

“Based on the strength of the preclinical data we have seen so far and interactions with the regulatory authorities, we have been able to further accelerate the clinical development of our investigational SARS-CoV-2 vaccine, Ad26.COV2-S, recombinant,” said Stoffels.

“Simultaneously, we are continuing our efforts to build important global partnerships and invest in our vaccine production technology and manufacturing capabilities. Our goal is to ensure we can deliver a vaccine to the world and protect people everywhere from this pandemic,” added Stoffels.

Johnson & Johnson stock rises on promising coronavirus vaccine trial

Mathai Mammen, M.D., Ph.D., is the global head of Janssen Research & Development, LLC at Johnson & Johnson. He noted that the potential for the vaccine can have a great impact on the world.

“As we collectively battle this pandemic, we remain deeply committed to our goal of providing a safe and effective vaccine to the world. Our pre-clinical results give us reason to be optimistic as we initiate our first-in-human clinical trial, and we are excited to enter the next stage in our research and development toward a COVID-19 vaccine,” said Mammen.

“We know that, if successful, this vaccine can be rapidly developed, produced on a large scale and delivered around the world,” added Mammen.

Financial analysts say Johnson & Johnson is one of the best dividend stocks of 2020

CNBC financial analyst Jim Kramer thinks that Johnson & Johnson stock is a buy because of its strong dividend and its vaccine development.

“J&J has the best pipeline of these drug companies,” said Cramer. “Their vaccine could fail and the stock wouldn’t even go down. That’s how cheap this thing is. I think it’s a buy right here,” said Cramer.

In addition to Cramer, Merrill Lynch analyst Bob Hopkins is bullish on Johnson & Johnson stock. He believes that the company can overcome its past troubles if the coronavirus vaccine is effective.

“We continue to like the risk reward in JNJ. While visibility remains low with litigation, Covid’s impact on the economy could well bring names like JNJ back into favor and goodwill from a successful vaccine could limit drug pricing risk,” wrote Hopkins in a note to clients.

Because of its healthy dividend and promising vaccine, investors can pick Johnson & Johnson stock.

4. Altria

While Johnson & Johnson wants to be a dividend stock that promotes health, Altria (NYSE: MO) is a “sin” dividend stock. The tobacco company has an impressive 8% dividend yield. In Altria’s Q2 2020 earnings report, chief financial officer Sal Mancuso spoke about Altria raising its dividend payout.

“We are pleased to announce that yesterday, our board declared the quarterly dividend ahead of our normally scheduled declaration date. The board declared a quarterly dividend of $0.86 per share, representing a new annualized dividend rate of $3.44 per share,” said Mancuso.

“This represents an increase of 2.4% from the previous annualized rate of $3.36 per share and marks the 55th dividend increase in the past 51 years. Our balance sheet is strong, and our core tobacco businesses continue to generate significant cash,” added Mancuso.

Altria stock rises as Q2 2020 earnings beat expectations

Despite the slowdown in tobacco sales, the tobacco company had an increased earnings per share in its latest earnings report.

“Despite the challenges of the COVID-19 pandemic in the U.S., our employees continue to execute against our 10-year vision with strong focus and commitment,” said Altria in a statement.

“Over the first-half of 2020, we believe Altria showed resilience in volatile market conditions, growing adjusted diluted earnings per share by 8.5%, ” said Altira. The company’s earnings were “driven by the outstanding financial performance of our core tobacco businesses. We’ve also hit key milestones and made steady progress behind our noncombustible product portfolio,” added Altria.

Financial analysts bullish on Altria as one of the best dividend stocks of 2020

Morningstar analyst Phillip Gorham rates Altria as an underrated stock. He notes that the overall robust cigarette industry makes the stock a buy.

“Underlying trends in the U.S. cigarette industry appear to be intact following Altria’s first-quarter results, which included very strong shipment numbers, with comparability affected by a number of technical issues,” he said.

“Aside from adjusting for the timing of some of the company’s shipments that were brought forward into the first quarter, we are making only modest tweaks to our estimates for the remainder of the year and our longer-term outlook is unchanged. We are reiterating our wide-moat rating and $54 fair-value estimate,” added Gorham.

Stifel analyst Christopher Growe noted that Altria had controversy because of its vaping products.

“The tobacco stocks, especially Altria, seem to find controversy at every turn, with investors increasingly focused on the negatives and the risks, which have always been ever-present for this industry, and not rewarding the improvement in the fundamentals,” said Growe.

However, during the pandemic, people have been buying more tobacco products in bulk during the quarantine. Because of an increase in tobacco use, Growe rates Altria one of the best dividend stocks of 2020 to buy.

“We remain confident in Altria’s ability to lead a price increase again this fall, in line with our estimate (+6% price per pack growth this year) supporting the 4% profit growth we estimate for Altria’s Smokeable division,” said Growe.

If investors want to pick a dividend stock with a strong customer base, Altria is a good choice.

5. Exxon

Even though oil prices have dropped, gas giant Exxon (NYSE:XOM) is still one of the best dividend stocks of 2020. In its latest earnings report, Exxon had a decline in revenue, but still maintains its hefty 8.27% dividend yield.

“Second-quarter results included a $1.9 billion noncash benefit from inventory valuation, largely reversing the first-quarter impact due to the improvement in commodity prices relative to the end of March and resulted in a second-quarter U.S. GAAP loss of $1.1 billion,” noted Exxon.

ExxonMobil is one of the best dividend stocks of 2020 to buy and hold

“Excluding identified items, there was a $3 billion loss in the second quarter,” noted Exxon.

The oil giant noted that its revenue was “down $5.3 billion from the first quarter driven by the effects of COVID-19, including the unprecedented decline in oil and product demand, resulting in significant declines in prices.”

ExxonMobil is still one of the best dividend stocks of 2020 despite earnings miss

Because of the global shutdown, many cars stayed off the road and the need for gas declined greatly. As a result, oil company Exxon had a whopping net loss of $1.08 billion in Q2 2020. Exxon chief executive officer Darren Woods explained that the coronavirus caused a decline in the corporation’s profits.

“The global pandemic and oversupply conditions significantly impacted our second quarter financial results with lower prices, margins, and sales volumes,” said Woods.

Exxon vice-president Neil Chapman noted that despite the revenue drop, Exxon remains one of the best dividend stocks.

He noted that the oil company has “a long history of providing a reliable and growing dividend. A large portion of our shareholder base has come to view that dividend as a source of stability in their income,” said Woods.

“We take that very seriously,” added Woods.

Chapman also noted that reducing expenses will help Exxon maintain its high dividend.

“The plans will include further reducing operating expenses and identifying additional opportunities to efficiently defer more capex. Doing so will enable us to maintain the dividend and hold debt at its current level,” said Chapman.

Financial analysts rate ExxonMobil as one of the best dividend stocks of 2020

Because of Exxon’s spending reduction, Cowen & Co. analyst Jason Gabelman rates Exxon as one of the best dividend stocks of 2020. He commented that Exxon’s asset sales could help reduce

“It has fallen a bit behind schedule but there have been reports there are several packages out,” said Gabelman.

“Given the current environment, XOM[Exxon] will likely need to continue defending its long-term view of energy growth that underpins its counter-cyclical capex [capital expenditure] program that could ramp back up next year,” added Gabelman.

Morningstar strategist Allen Good also rates Exxon as one of the best dividend stocks of 2020. He noted the company’s low expenditure costs.

“We[Morningstar] continue to rate Exxon Mobil as one of the higher-quality integrated firms, given its ability to capture economic rents along the oil and gas value chain. While its peers operate a similar business model with the same goal, they fail to do so as successfully, as evidenced in the lower margins and returns. Exxon generates its superior returns from the integration of low-cost assets combined with a low cost of capital; this combination produces excess returns greater than those of its peers,” said Good.

“Additionally, its decision to increase investment relative to peers during the next five years is also likely to narrow the gap in returns with peers,” added Good.

Other financial experts think investors should sell ExxonMobil stock

While some analysts are bullish on Exxon stock, others think that the dividend aristocrat is still a pass for investors. Citi analyst Alistair Syme doubts that the oil corporation can maintain its high dividend with declining oil sales.

“The dividend is undoubtedly the real question, or maybe more correctly the forward scenario that the company is adopting to underpin shareholder returns,” said Symes.

RBC Capital Pavel Molchanov wrote in a note to clients that Exxon’s high dividend yield can withstand extra debt.

“While we see the dividend as safe — if for no other reason than management’s desire to maintain S&P Aristocrat status — the cash flow outspend is colossal under current conditions,” wrote Molchanov.

ExxonMobil is undergoing a lot of turbulence, but is still one of the best dividend stocks of 2020 to buy and hold.

6. Chevron

In addition to ExxonMobil, Chevron is an oil giant that is struggling with the COVID-19 pandemic fallout. Despite diminished sales, Chevron’s dividend yield is still a healthy 6.15%.

Chevron Q2 2020 earnings down because of COVID-19

The oil company had a staggering $8.3 billion loss in the past quarter. Chevron CEO Pierre Breber spoke about the corporation’s disappointing Q2 2020 revenue report.

“Second quarter was a challenging one for the company. Financial results included $4.9 billion in special item net charges and a foreign exchange loss of over $400 million. Excluding special items and FX, the quarter resulted in a $3 billion loss or $1.59 per share,” said Breber.

Crude Oil Futures Price levels 1987 through2017 — Crude Oil Futures Price levels 1987 through 2017 before coronavirus hurt Chevron as a dividend stock

Morningstar rates Chevron as one of the best dividend stocks of 2020

Morningstar analyst Allen Good noted that Chevron is one of the best dividend stocks of 2020 because of its expanded natural gas production.

“Although Chevron is an integrated energy company, its narrow economic moat rests on the quality of its upstream portfolio. Chevron’s upstream segment holds a low-cost position based on an evaluation of its oil- and gas-producing assets, using our exploration and production moat framework. Its greater exposure to liquids and liquids-linked natural gas production has produced peer-leading cash margins during the past five years,” said Good.

Good also noted Chevron’s expanded global oil exploration. The growth makes Chevron stock attractive to the financial expert.

“New production from its LNG projects Gorgon and Wheatstone, offshore oil developments in the Gulf of Mexico and West Africa, and tight oil growth should preserve this exposure. We forecast that Chevron can deliver a midcycle cash operating margin of nearly $30 per barrel of oil equivalent, the highest in its peer group,” said Good.

Some analysts see Chevron stock as a sell despite dividend

While some analysts are bullish on Chevron stock, others are bearish on one of the best dividend stocks of 2020. Goldman Sachs analyst Neil Mehta was pleased with Chevron’s oil production.

“Production came in above our expectations, with volumes primarily beating our estimates on U.S. (both liquids and gas) and International liquids,” wrote Mehta in a note to clients.

While Mehta notes Chevron’s increased oil production as a plus, he thinks Chevron stock isn’t a buy.

“We [Goldman Sachs] see the absolute decline in [the] share price as a function of the collapse in oil demand and oil prices,” said Mehta.

Citi analyst Alistair Syme also doubts that Chevron’s worse-than-expected results mean that the corporation’s stock may tumble.

“2Q results show a picture that is perhaps not as resilient as the market thought it might be,” said Syme.

Chevron stock may be volatile because of COVID-19. However, Chevron is still one of the best dividend stocks of 2020.

7. Pfizer

Pfizer (NYSE: PFE) stock has an impressive dividend of 3.95%. The pharmaceutical company’s stock rose because of a promising COVID-19 vaccine. Pfizer’s $11.8 billion revenue beat Wall Street expectations. The company’s CEO, Albert Boula, spoke about the potential coronavirus vaccine.

“We remain fully committed to confronting the public health challenge posed by the COVID-19 pandemic by collaborating with industry partners and academic institutions to develop potential approaches to prevent and treat COVID-19,” said Boula.

“Our researchers and scientists have made important progress toward developing an effective vaccine though significant additional work remains,” added Boula.

Some financial analysts rate Pfizer as one of the best dividend stocks of 2020

Because of Pfizer’s coronavirus vaccine and high dividend, some financial experts rate the company’s stock as a buy.

Edward Jones analyst Ashtyn Evans noted that Pfizer’s other successful medications make the stock a buy. She said that Edward Jones’ “positive view of the stock is driven by the company’s extensive pipeline and lower valuation relative to peers.”

Morningstar rates Pfizer stock as a buy

Morningstar director Damien Conover cited Pfizer as one of the best dividend stocks of 2020 because of its impressive cash flow.

“Pfizer’s operating structure allows for cost-cutting following patent losses to reduce the margin pressure from lost high-margin drug sales. Overall, Pfizer’s established product line creates the enormous cash flows needed to fund the average $800 million in development costs per new drug. In addition, the company’s powerful distribution network sets up the company as a strong partner for smaller drug companies,” said Conover.

“Pfizer’s entrenched consumer and vaccine franchises create an added layer of competitive advantage”, added Conover.

Conover also noted that Pfizer is one of the best dividend stocks “stemming from brand power in consumer healthcare and manufacturing cost advantages in the vaccines division. Pfizer recently created a consumer healthcare joint venture with GlaxoSmithKline that could lead to an eventual divestment of the unit.”

Pfizer’s impressive cash flow and potential profits from its COVID-19 vaccine make Pfizer one of the best dividend stocks of 2020 and beyond.

8. Coca-Cola

While Coca-Cola(NYSE:KO) stock dropped because of the coronavirus crisis, the beverage company has one of the best dividend stocks of 2020. Coke’s dividend yield of 3.47% should be impressive to investors.

Coke’s chief financial officer, John Murphy, spoke about Coke’s net profit decline to $1.78 billion.

“Organic revenues declined 26%, driven by a 22% decline in concentrate shipments and a 4% decline in price/mix,” said Murphy.

Financial experts rate Coke stock as a buy

Morningstar analyst Nicholas Johnson believes Coca-Cola can withstand the current economic volatility.

“At a high level, we believe there are characteristics endemic to the nonalcoholic beverage industry more generally, as well as Coca-Cola’s specific positioning within this industry, that result in a competitively advantaged business,” said Johnson.

Coca-Cola stock is one of the best dividend stocks of 2020

“While the company is disproportionately exposed to beverage categories that are in secular decline, we believe it has the brand equity to induce demand for reformulated variants of its most popular trademarks, the resources to reorient its portfolio toward drink categories that are more consistent with the consumer ethos, and the scale to fulfill these endeavors profitably,” added Johnson.

In addition to Morningstar, HSBC analyst Carlos Laboy said that Coke stock is undervalued. He also believes that Coke bottlers are “poised to accelerate their growth contribution [to Coca-Cola’s profits] as they grow into market developers with better tools and a richer service culture.”

Coca-Cola is one of the best dividend stocks of 2020 because of its cash flow and resilience through economic downturns.

9. Home Depot

As the coronavirus pandemic hurt many corporations, Home Depot’s (NYSE:HD) sales rose. The corporation’s stores helped many people who were homebound in the spring. Home Depot’s Q1 2020 revenue jumped 7% to $28.26 billion. The company’s 2.27% dividend yield makes it a good divident stock to buy for investors. Home Depot’s CEO, Craig Menear, spoke about the company’s results.

“As the COVID-19 pandemic evolved, we anchored to the core values of our Company by focusing on two key priorities: working to ensure the safety and well-being of our associates and customers, and providing our customers and communities with essential products,” said Menear in a statement.

“We took early and decisive action to intentionally limit customer traffic in our stores which we believe had a significant impact to sales in many markets,” added Menear.

Home Depot is one of the best dividend stock to financial experts

Brian Nagel is the senior equity research analyst at Oppenheimer. He believes that Home Depot is one of the best dividend stocks of 2020. He thinks that Home Depot benefited from the recent nationwide quarantine.

“I think Home Depot is one of the companies that is benefiting or really capitalizing, performing well through this Covid-19 crisis and is likely to perform well as the crisis headwinds abate,” said Nagel.

“More people are spending more time in their homes, and you’re seeing that increase spend as more people spend more time working on their houses,” added Nagel.

Jefferies equity analyst Jonathan Matuszewski noted that Home Depot should improve in its next earnings report because of Memorial Day sales.

“Given HD’s commentary, it will be key to understand the maintenance or potential loosening of such actions heading into the typically-promotional Memorial Day Weekend,” said Matuszewski.

“If the home improvement centers can constrain incremental expenses to meet outsized traffic while still protecting customers/employees, EPS[earnings per share] should improve,” added Matuszewski.

Home Depot is one of the best dividend stocks of 2020 because of its service to customers through the COVID-19 pandemic.

10. Merck

In addition to Pfizer, Merck is a pharmaceutical company that is one of the best dividend stocks of 2020. Mercks’s dividend yield of 3.16% is impressive to investors.

Merck’s Q2 2020 revenue dropped to $10.87 billion because of the COVID-19 crisis. CEO Ken Frazier spoke about the results.

“As expected, social distancing measures in many regions negatively impacted second-quarter volumes for many of our products. However, customer access to care is steadily improving, including in our portfolio of vaccines, which was hit particularly hard this quarter,” said Frazier.

Merck expects revenue to improve as it develops a COVID-19 vaccine.

“Both vaccine candidates will soon enter the clinic and we have begun investing to facilitate our ability to manufacture hundreds of millions of doses,” said Frazier.

Financial experts say Merck stock is a buy

Morningstar director Damien Conover is bullish on Merck stock. He noted that Merck’s patents make the company one of the best dividend stocks of 2020.

“Patents, economies of scale, and a powerful intellectual base buoy Merck’s business and keep it well shielded from the competition. Patent protection should continue to keep competitors at bay while the company strives to introduce the next generation of drugs,” said Conover.

Conover also commented that Merck’s cash flow makes the pharma company’s stock a buy.

“Further, the company’s enormous cash flows support a powerful salesforce that not only sells currently marketed drugs but also serves as a deterrent,” said Conover.

“As a result, Merck offers a powerful partnership opportunity for externally developed drugs. The cash flows also put the company in the rare position of supporting the approximately $800 million in research and development,” added Conover.

For investors that want a strong pharma stock with good dividends, Merck is an excellent choice.

The best dividend stocks of 2020 show resilience

While 2020 has been a brutal year for many stocks, dividend stocks have proven resilient. With strong cash flows and reliable quarterly payouts, investors can rest assured with these stocks in their portfolios. With TradingSim’s blogs and charts, investors can find the best dividend stocks of 2020 to buy and hold.

Pure play businesses are becoming safer investment options in this uncertain time of COVID-19. These corporations that offer one product can be great investments. But what is the complete picture of pure play? This TradingSim article will explain what a pure play stock is and how their business models work. This article will also pick the top 10 pure play businesses investors can choose.

What is a pure play stock?

A pure play business focuses on selling only one product. For example, Starbucks (NYSE:SBUX) stock just specializes in coffee. Tiffany &Co. (NYSE:TIF) stock focuses exclusively on luxury jewelry. Many pure play businesses are value stocks because they are able to excel in one field.

What is a pure play business model?

A pure play business model helps a company stand out. For example, if a company like Tesla (NASDAQ:TSLA) only produces electric cars, it can have an advantage over Ford (NYSE:F). Tesla noticed its difference from other car stocks in its IPO prospectus.

“We design, develop, manufacture and sell high-performance fully electric vehicles and advanced electric vehicle powertrain components. We have intentionally departed from the traditional automotive industry model by both exclusively focusing on electric powertrain technology and owning our vehicle sales and service network,” said Tesla in its IPO launch.

As opposed to diversified stocks, pure play stocks focus on one specific sector. While Coca-Cola(NYSE:KO) is purely a beverage company, Pepsi (NASDAQ:PEP) has food and drink products.

Tesla stands apart with its business model

Because Tesla focuses on electric cars, Tesla can have more control of production of its vehicles. Founder Elon Musk noted that being selective about Tesla’s car production helped the company stand out.

“If we could have [mass marketed] our first product, we would have, but that was simply impossible to achieve for a startup company that had never built a car and that had one technology iteration,” said Musk.

In addition to dominance in production, Tesla’s business model means that the corporation can have more direct interaction with customers. In opposition to car companies that sell through dealerships, Tesla sells its vehicles directly to customers in its own. That enables Tesla to reach a large number of customers.

Tesla also offers its own charging stations for its vehicles. That insular production of electric vehicle accessories also helps the company’s singular pure play business model.

Is pure play a good investment strategy?

As an investment strategy, pure play can be effective. There are some advantages to having a pure play stock strategy. For beginning investors, pure play stocks can have an analysis that’s easier to understand.

What are the benefits of trading pure play stocks?

If a trader is investing in Coke, they just have to follow trends in the beverage industry. With Coca-Cola stock, the company’s revenue stream and business model are easy to understand.

However, with Pepsi, there are many different food and drink sectors to track. In a diversified stock, there are varied metrics to measure. Because they tend to dominate certain industries, if they perform well, they can pay off larger dividends for investors. In a bull market, pure play stocks can enjoy a longer period of high returns, especially if they’re growth stocks.

What are the risks in trading pure play stocks?

While there are benefits to pure play, there are downsides as well. If an industry is struggling, then a pure play stock will likely tumble. After COVID-19 shut down the cruise industry, Royal Caribbean( NYSE:RCL) stock fell by double digits. Exposure to one industry can also hurt investors in a bear market when stocks are falling. Pure play investing can be riskier because there is less protection against a decline in stock prices.

What are the top 10 pure play stocks?

The following stocks are some of the most effective pure play businesses. These stocks can pay off for investors with their focus in a specific industry.

1. Netflix

Netflix(NASDAQ:NFLX) is perhaps the most successful pure play stock in the stock market today. Even though the company started as a DVD rental service , the company moved on to dominate the streaming entertainment space.

When Netflix started, co-founders Reed Hastings and Mark Randolph wanted just wanted to create a mail-order DVD rental service.

“We were sitting down having coffee one morning in Santa Cruz and we were talking about whether or not you could mail a DVD in a first-class envelope or not,” Randolph remembers.

Netflix already was a pure play DVD service. When movie downloads became popular, Hastings knew that he wanted Netflix to evolve to streaming video.

“Movies over the internet are coming, and at some point it will become big business,” said Hastings in an interview.

“We started investing 1 percent to 2 percent of revenue every year in downloading, and I think it’s tremendously exciting because it will fundamentally lower our mailing costs. We want to be ready when video-on-demand happens. That’s why the company is called Netflix, not DVD-by-Mail,”, added Hastings.

Even though Netflix added 16 million subscribers in Q1 2020, Hastings noted that he was uncertain how Q2 2020 earnings would be in the future. With the economy re-opening, Hastings thinks there will be fewer subscribers staying at home.

“We don’t use the words guess and guesswork lightly. We use them because it’s a bunch of us feeling the wind and it’s hard to say. But again, will internet entertainment be more and more important over the next five years? Nothing’s changed in that,” said Hastings.

Analysts bullish on Netflix stock

Despite Hastings’ uncertainty, many financial analysts think Netflix will increase its subscriber base. Analysts at Jefferies rate Netflix as a buy. Because of the company’s international growth, Jefferies analysts wrote in a note to clients that Netflix should perform well in Q2 2020 even if subscription rates increase.

“Importantly, our revenue growth assumes a 15% subscriber CAGR[ and just a 3% ARPU [average revenue per user] CAGR(compound annual growth rate), mitigating the bear thesis that sizable price hikes are necessary,” wrote the analysts.

The Jefferies analysts also noted that they believe that Netflix’s positive operating cash flow will help the corporation remain profitable.

“We believe NFLX[Netflix] will soon reach sustained FCF[free cash flow] profitability, in which it will be able to self-fund content and become less reliant on tapping the capital markets,” wrote the analysts.

Netflix’s pure play business model of focusing on streaming entertainment has paid off. Investors looking for a successful pure play stock can pick the streaming company’s stock.

2.Coca-Cola

Coca-Cola (NYSE:KO) is a classic example of a pure play business. The corporation focuses exclusively on selling its syrup to other bottling companies to manufacture.

Coca-Cola produces about 500 beverages. As customers turn away from sugary drinks, the company is branching out into energy drinks, bottled water, tea, and coffee. By putting more of the bottling and manufacturing responsibilities to outside sources, Coke has become very profitable.

Coca-Cola impacted by nationwide shutdown

While Coca-Cola is a top pure play stock, the nationwide shutdown has hurt Coke’s sales. Many Coke sales are through restaurants and sporting events. With the closure of restaurants and cancellation of games, Coke’s revenue dropped 1% to $860 billion. Coca-Cola’s CEO, James Quincey, said that with the coronavirus outbreak shutting down businesses, he wasn’t sure how the company’s future results would be.

“The ultimate impact on the second quarter and full-year 2020 is unknown at this time, as it will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, the impact to the second quarter will be material,” said Quincey.

Quincey also noted that despite the sluggish results, Coca-Cola is poised to recover.

‘We’ve been through challenging times before as a company, and we believe we’re well-positioned to manage through and emerge stronger,” said Quincey.

Coca-Cola a strong pure play stock to financial experts

Even though Coca-Cola’s Q1 2020 results were disappointing, financial experts still rate Coke stock as a buy. Financial analyst Nicholas Johnson is bullish on the beverage company.

“Despite solid first-quarter results, management opted against issuing formal guidance, and its commentary seemed to portend a pretty ugly second quarter. Nevertheless, we remain confident in the Coca-Cola system’s strategic advantage and believe the right tactical competencies are in place to allow the firm to navigate disparate dynamics across its territories,” said Johnson.

HSBC analyst Carlos Laboy also rates Coke as a buy. He believes that Coke will recover as European and American bottlers re-open their factories. He believes the bottlers are “poised to accelerate their growth contribution [to Coca-Cola’s profits] as they grow into market developers with better tools and a richer service culture.”

Warren Buffett values Coke’s pure play stock

Legendary investor Warren Buffett is a long-time Coke investor. Buffett’s Berkshire Hathaway has $18 billion invested in Coke. Buffett owns 9% of Coca-Cola’s stock because it’s a globally renowned brand with a substantial dividend payout of 3.5%. As a pure play beverage company, Coke’s low debt and reliable dividend makes it a stable choice for investors.

3.Chewy

Chewy(NYSE:CHWY) is a pure play e-commerce company that focuses on a subscription-based service for pet food and supplies. Chewy’s business model is to add a personal touch to its customer service. They’re so hands-on with their customers that they even send portraits to customers of their pets.

Since the company went public, pet parents have helped Chewy have a strong Q1 2020 earnings report. Sales grew 46% year-over-year to $1.62 billion. Chewy CEO Sumit Singh commented on the pet food company’s robust revenue report.

“We had a strong start to 2020 with first-quarter net sales increasing 46 percent year-over-year and gross margins expanding 50 basis points,” said Singh.

Singh observed that more customer spending through its subscription service helped Chewy’s profits.

“Higher spending from our existing customers and growing Autoship sales reflect strong business momentum as more customers continue to shift their spending to Chewy, driving increased basket size and higher repeat purchase activity,” said Singh.

Singh also spoke about how Chewy is poised to expand with more people adopting pets.

“We are proud to be the e-tailer of choice for millions of new and existing pet parents during this unprecedented time. Chewy is well-positioned to thrive in this expanded marketplace, and we remain focused, as always, on our mission of becoming the most trusted and convenient online destination for pet parents (and partners) everywhere,” added Singh.

With an increase in pet adoption during the quarantine, Chewy stock enjoyed a whopping 75% increase so far this year.

Chewy stock a buy for RBC Capital

As a successful pet supply pure play stock, Chewy is a buy for financial analysts. RBC Capital’s Mark Mahaney rates Chewy as a top pure play stock in a note to clients.

“Importantly, CHWY’s [NYSE:CHWY] results and outlook suggest to us that the company is at an inflection point and that it is a structural winner from the COVID crisis,” wrote Mahaney.

Mahaney expects Chewy stock to rise as pet adoptions continue to increase.

“Pet product purchases have meaningfully accelerated their online adoption, and we don’t expect a reversion,” said Mahaney.

Some financial experts neutral on Chewy stock

While RBC Capital is bullish on Chewy stock, some financial analysts are neutral on the stock. Jefferies analyst Brent Thill rates Chewy stock as a hold despite its positive earnings report and its“position as a key beneficiary of a shift to online in essential categories (like pet) driven by the pandemic.”

Thill rated Chewy stock as a hold because of the company’s reduced full-year guidance with the unpredictability of the economy later this year. His hold rating is “likely a reflection of Chewy being pragmatic during heightened uncertainty.”

Chewy’s a pure play stock that investors can pick for results. Its dedicated customer service and promising profits make Chewy stock a top pure play

4.Beyond Meat

Beyond Meat(NYSE:BYND) is a pure play meat alternative producer that is performing well. Despite the COVID-19 crisis diminishing sales in restaurants, chief marketing officer Mark Nelson touted the positive Q1 2020 results.

“We maintained our solid top-line momentum while driving our best-ever performance in production unit cost per pound,” said Nelson.

“Despite near-term challenges ahead stemming from the ongoing global health crisis, our improving operating results and continued strength of our balance sheet give us added confidence about the Company’s long-term financial position,” added Nelson.

Analysts bullish on Beyond Meat

Because of Beyond Meat’s positive Q1 2020 results, many financial analysts are bullish on Beyond Meats stock. Steven Strycula of UBS rates Beyond Meat stock as a buy. He asserts that because many restaurants were closed during the quarantine, Beyond Meat can still be sold in grocery stores.

“With food service industry traffic down, BYND plans to lean-on its retail platform to drive growth and is repurposing production capacity to meet demand,” wrote Strycula in a note to clients.

He also believes that Beyond Meat will also benefit from rising beef prices.

“BYND[Beyond Meat] seeks to use value packs & increased trade to stimulate trial, particularly as beef prices spike,” added Strycula.

Beyond Meat is a pure play plant-based meat alternative that has found success by catering to customers who want healthier eating options.

5. Trulieve Cannabis

With a rise in cannabis sales during COVID-19, (CSE:TCNNF) Trulieve Cannabis (CSE:TRUL) is a pure play pot stock that’s outperforming its competition. The Florida-based company has built a loyal customer following by promptly responding to customers’ needs. CEO Kim Rivers notes that Trulieve’s pure play business model works because Trulieve reaches out personally to customers.

“One of our mottos at Trulieve is that we grow one patient at a time. In Florida, our patient base are some of the most vulnerable population, and it’s really important that we respond to them not only in a timely manner, but in a very compassionate manner,” said Rivers.

“I think it’s incredibly important, especially in this current phase, for us to be very, very connected with our patient base and responsive in setting that high level of customer service experience. I’m very proud of our team and our ability to be responsive in real-time to patients,” added Rivers.

Trulieve profits soar by triple digits

In Trulieve’s Q4 2019 results, the pot producer earned $79.7 million. That amount shows a whopping 146% increase over Q4 2018. Rivers commented on the positive revenue report.

“Our fourth-quarter results reflect our strong brand and customer loyalty, which were key factors in our success for the year. We continued to grow our footprint in Florida and made significant strides building out the infrastructure needed to maximize efficiencies and achieve economies of scale,” stated Rivers.

Rivers also touted Trulieve’s positive cash flow and expansion of dispensaries.

“Trulieve’s execution of key fundamentals and financial discipline coupled with market share growth this quarter contributed to positive free cash flow, further strengthening our balance sheet and validating our financial stewardship,” added Rivers.

Trulieve a pure play buy for Wall Street analysts

According to financial analysts, Trulieve stock is a strong buy. Many analysts polled by the TipRanks website say shares should rise by 68%. With a bullish outlook from investors and an effective pure play business model, Trulieve could be a top marijuana stock for investors.

6. Salesforce

Salesforce(NYSE:CRM) is a pure play customer relationship management solution company. The company’s successful business model comes from its early adoption of cloud technology. In addition to offering its own cloud services to customers, Salesforce added customers by letting them build apps on Salesforce as well.

Salesforce’s CEO, Marc Benioff, noted that he wanted to make cloud technology and customer relationship technology easily accessible.

“This [cloud delivery] model made software similar to a utility, akin to paying a monthly electric bill. Why couldn’t customers pay a monthly bill for a service that would run business applications whenever and wherever?”

The corporation had a positive Q1 2021 earnings report with $4 billion in revenue despite the coronavirus outbreak.

Salesforce stock falls but is still top pure play business

Benioff spoke about the company’s results.

“Our results, amidst this global crisis, demonstrated our ability to execute at speed, innovate at scale and the strength of our business model,” said Marc Benioff, Chair & CEO, Salesforce.

Benioff also noted that the company is still making changes during the COVID-19 era.

“We made long-term investments in keeping our employees safe, supporting our customers, delivering crucial innovation like Work.com, and helping our communities with PPE, grants, and technology. The pandemic showed us that digital is an imperative for every company, and we’re confident Salesforce will continue to accelerate as we bring our customers into the new normal,” said Benioff.

Jefferies rates Salesforce as a buy

Jefferies analyst Brent Thill believes Salesforce is a buy. He thinks that the company can continue to be profitable after its recent purchase of analytics platform Tableau. The deal was reportedly worth $16 billion.

“We[Jefferies] believe we saw a meaningful acceleration in M&A in 2019, and CRM needs to take a breather to digest the Tableau deal, the biggest one so far,” said Thill.

Thill thinks that Tableau’s integration with Salesforce is critical before Salesforce acquires more businesses.

“CRM needs to make sure the integration between the various clouds is seamless before embarking on more M&A,” said Thill.

Thill notes that Salesforce stock will grow because of more businesses using cloud technology because of work-from-home orders.

“We[Jefferies] continue to be positive on CRM and believe there is ample value to unlock. [The long-term] pipeline is robust. We also believe COVID-19 has been accelerator driving more businesses to the cloud, which should benefit CRM,” said Thill.

Salesforce a SaaS pure play stock pick

Salesforce is a successful pure play SaaS( software-as-a-service) company. Morningstar financial analyst Dan Romanoff also agrees that Salesforce is a top pure play stock because of its business model.

“We[Morningstar] believe Salesforce.com represents one of best long-term growth stories in software. After introducing the software-as-a-service model to the world, Salesforce.com has assembled a front-office empire that it can build on for years to come,” said Romanoff.

Like Thill, Abramoff believes that Salesforce’s pure play business model will grow once the corporation integrates the services of Tableau, its latest acquisition.

Salesforce should “benefit further from natural cross-selling among its clouds, upselling more robust features within product lines, pricing actions, international growth, and continued acquisitions,”.

“The tight integration among the [company’s] solutions and the natural fit they have with one another makes for a powerful value proposition,” added Abramoff.

Salesforce has been helping businesses keep track of customer service in the cloud for years. Its customer relationship management dominance makes Salesforce stock a top pure play choice for traders.

7. Starbucks

Starbucks stock (NYSE:SBUX) is a pure play business that dominates the coffee industry. The Seattle-based coffee company made rare gourmet coffee an everyday treat in its business model. The fast expansion of stores and diverse mix of coffee flavors all helped Starbucks become a top pure play stock.

Starbucks has mixed Q2 2020 results

Because of the COVID-19 crisis, Starbucks CEO Kevin Johnson said that revenue fell to $6 billion. Many Starbucks stores closed down during the pandemic, so Starbucks’ sales slowed.

“As a result, consolidated revenue in Q2 was $6 billion, reflecting a 5% decline compared to prior year, primarily due to a 10% contraction in comparable store sales globally, ” said Johnson.

Chief financial officer Patrick Grismer also noted that US sales declined because of the pandemic.

“Revenue for our Americas segment was flat in Q2 relative to the prior year at $4.3 billion as incremental sales from net new store growth of 3% over the past 12 months was effectively offset by a 3% decline in comparable store sales,” said Grismer.

While Starbucks had disappointing results, the coffee behemoth did have an increase in its customer loyalty program Starbucks Rewards. Grismer noted that the program had an increase in members.

“Of note, during the second quarter, 90-day active Starbucks Rewards members, our highly routinized, highly engaged and loyal customer base with whom we can directly communicate digitally, increased to 19.4 million in the US, up 15% from a year ago,” said Grismer.

Some analysts rate Starbucks a pure play buy

Despite the sales slump, Broyhill Asset Management, a boutique investment firm, is bullish on Starbucks stock. Broyhill is optimistic that its Chinese stores will re-open soon.

“Starbucks (SBUX) was one of the first US companies to warn investors of the financial hit from the pandemic. But after closing nearly 80% of its stores in China by early February, the company had already re-opened roughly 95% of those stores by March month-end,” said Broyhill.

“We established a position in the stock near it’s lowest valuation in years as we gained confidence that the company’s China stores would fully recover in a couple quarters. In the near term, mobile orders (which represented ~ 80% of China’s sales mix in the last weeks of February) should put a floor under US sales, while the resumption of development in China, with best-in-class unit economics, provides a multi-year runway for expansion,” added Broyhill.

Financial expert Matthew McCall also thinks Starbucks stock is a buy even if Starbucks stock is falling. He wants investors to buy the dip because it’s “a high-quality, well-run company. That should put it on investors’ radar for buy on dips.”

Because Starbucks is a massively popular brand that has many loyal customers, investors can choose Starbucks stock as a pure play coffee stock.

8. Activision Blizzard

Activision Blizzard(NYSE:ATVI) is a gaming pure play stock that has outperformed during the quarantine. With many people stuck inside, Activision monthly users rose 18% . Gamers rushed to play the new Call of Duty game and played mobile games like Candy Crush more as well.

Because of the rise in gaming, the company had a positive Q1 2020 earnings report. Dennis Durkin, Activision’s chief financial officer, spoke about the results.

“Activision revenue was $519 million growing 64% year-over-year. Growth was driven by Call of Duty: Modern Warfare and Warzone in-game revenues, strong game sales of premium Modern Warfare and the addition of Call of Duty Mobile. Operating income was $184 million with an operating margin of 35%, 12 percentage points higher year-over-year,” said Durkin.

While some many say Activision is too dependent on a few gaming franchises like Call of Duty and World of Warcraft, CEO Bobby Kotick thinks the pure play gaming business strategy is still profitable.

“At a time when so many forms of social interactions and entertainment experiences have been shut down, we’re providing entertainment with positive impact for hundreds of millions of people through our games,” said Kotick.

Activision a buy for financial experts

Because of Activision’s dominance as a pure play stock, many financial analysts rate Activision as a buy. Todd Gordon, managing director at Ascent Wealth Partners, is bullish on Activision stock.

“It’s[Activision] a $46 billion market cap. They’ve got franchises like Call of Duty and Candy Crush. They have a better share of mobile gaming. Activision is well-represented across multiple platforms including PC, console, gaming, stuff like that. So, we hold Activision in our global growth portfolio,” said Gordon.

Danielle Shay, director of options at Simpler Trading, also thinks Activision is a pure play stock that investors should choose. She thinks that Activision is a buy because there is an increase in gaming during the quarantine.

“More people are staying at home, they’re looking for entertainment and options at home, and with the client base that these two companies [Activison and another gaming pure play stock Two Play] already have, I think this is going to be fantastic for them,” said Shay.

With a focus on popular games and increased customers, Activision is a successful gaming pure play stock.

9. Peloton

Like Activision, Peloton(NYSE:PTON) is a pure play company that’s benefitted from the pandemic shutdown. The exercise bike company’s stock has skyrocketed 100% over the last few months as it attracts more customers.

Peloton’s business model comes from combining an old-school exercise bike with new technology of subscription-based online classes. Founder and CEO John Foley noted that Peloton’s pure play business model ties fitness with tech.

“Peloton is so much more than a Bike — we believe we have the opportunity to create one of the most innovative global technology platforms of our time,” Foley says. “It is an opportunity to create one of the most important and influential interactive media companies in the world; a media company that changes lives, inspires greatness, and unites people,” said Foley.

Peloton has robust Q3 2020 earnings report

Peloton’s Q3 2020 earnings report showed revenue growth from an increase in longer free trial subscriptions to its video service. Foley touted Peloton’s better-than-expected results.

“Early in the COVID crisis, we extended the digital subscription free trial period from 30 days to 90 days resulting in over 1.1 million downloads of Peloton Digital in the past six weeks. We were extremely proud to offer so many people free access to our incredible fitness content during this time,” said Foley.

“I am also proud of our financial performance this quarter with revenue growing 66% year-over-year to $524.6 million. With strong revenue flow through and leverage against our fixed costs, we achieved our first adjusted EBITDA positive quarter as a public company in Q3 with an adjusted EBITDA margin of 4.5%,” added Foley.

Peloton a strong pure play buy for some analysts

With Peloton’s strong revenue result, Wall Street analysts are raising their target price for the exercise bike’s stock. Cowen upped its Peloton price target from $54 to $70.

Cowen noted that Peloton is “helped by the pandemic, alongside marketing & logistics efficiencies. PTON(Peloton) also benefits from multi-year secular tailwinds behind the connected home fitness trend that PTON is pioneering. We raised FY20 to FY30 estimates and rolled DCF[discounted cash flow] to ’21; PT[price target] to $70 from $54, maintain Outperform.”

Analyst Todd Gordon noted that Peloton’s pure play business model helped the company succeed more than other fitness companies.

“This company was a first mover. It succeeded in the online fitness and social communities, unlike the other ones [with] hardware offerings like GoPro and Fitbit that I don’t think capitalized. They have a loyal customer base, high retention levels, and good margins from the subscription business”, said Gordon.

Some Wall Street analysts bearish on Peloton

While some analysts are bullish on Peloton, some financial experts are bearish on the pure play business. Gina Sanchez, CEO of Chantico Global, thinks that the company is facing stiff competition from other fitness equipment companies.

“It’s not just facing competition from SoulCycle. It’s is also facing competition from other bike makers like NordicTrack, Echelon, ProForm who are all forming their own studio offerings to help give a Peloton-like experience. They are a pioneer in this space but they’re also opening up the space for a lot of competitors,” said Sanchez.

Peloton is a fitness pure play stock that investors can choose to add to their portfolios.

10. Stitch Fix

Like Peloton, Stitch Fix (NYSE:SFIX) has a successful subscription-based service. The pure play e-commerce business has been booming since April as people are cleaning out their closets and updating their wardrobes.

Founder and CEO Katrina Lake noted that Stitch Fix’s strategy is to combine personalized shopping experiences with data science.

“We send you clothing and accessories we think you’ll like; you keep the items you want and send the others back. We leverage data science to deliver personalization at scale, transcending traditional brick-and-mortar and e-commerce retail experiences,” said Lake.

Stitch Fix a successful pure play e-commerce stock

Because of its combination of personalized customer service and data analytics, Stitch Fix’s Q1 2020 earnings report showed growth in clients. Lake commented on the results.

“We had another quarter of great momentum in Q1, delivering net revenue of $445 million, exceeding guidance and representing 21% year-over-year growth. We grew our active clients to 3.4 million, an increase of 17% year over year. Demonstrating the power of our data science, we continued to delight our clients, growing revenue per active client by 10% year over year, our sixth consecutive quarter of growth,” said Lake.

Analysts mixed on Stitch Fix stock

While Stitch Fix had a positive earnings report, the company had a sales decline in March. Because of the nationwide shutdown, some warehouses closed and many order couldn’t be filled as quickly. Because of the setback, many analysts like RBC Capital’s Mark Mahaney wrote a note to his clients about concerns about the pure play business.

“Given the COVID disruption, we expect weaker new/infrequent client conversions and the UK rollout to continue be challenged”, wrote Mahaney.

SunTrust Robinson analyst Youssef Squali is more bullish on the Stitch Fix stock. He believes that the company has an advantage with strong growth potential in ecommerce.

“We[SunTrust Robinson] remain bullish on the stock however, given SFIX’s strong competitive position in the structurally challenged Retail, robust unit economics, strong growth/margin potential in FY21 and beyond, and compelling valuation,” noted Squali.

Pure play businesses can have pivotal stocks for investors

Pure play businesses can have stocks that can pay off for investors. While pure play stocks carry risk, the stocks mentioned above persevered because of their uniqueness and innovation. With TradingSim charts and analysis, investors can find the best pure play businesses to add to their portfolios.

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