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Spotting the star stocks in retail, restaurants and communication

The impact of the coronavirus crisis on businesses around the world continues to worry company executives and investors alike, with each sector feeling the tremors of the pandemic differently.

The retail sector has been hit hard with non-essential shops having to close, at least temporarily, but even those that have reopened are not anywhere close to business as usual. Restaurants have also seen profits plummet with customers staying away — many now face closure.


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Rapidly changing consumer behaviour has meant business leaders have had to shift their expectations for the year. But while the future still looks uncertain, companies that have learned to adapt their business models during the crisis have managed to thrive. So where might investors look for gains? Here are three stocks that are beating the market and might be worth a glance.

Target

US-based retailer Target should definitely be on your investment radar after recording the strongest quarterly growth in its history. After attracting millions of new customers online it set a record for same-store sales that drove profits up by 80.3% to $1.7bn, up from $938m in the second quarter last year. Sales rose by 24.8%, taking net revenue to $22.9bn. This compares to the revenue of $18.4bn in the same period last year.

Target has benefited from being able to stay open during the pandemic, as well as selling groceries and other essential items. It has capitalised on more people looking to socially distance and stay at home, resulting in a strong shift to online shopping and home delivery.

During the second quarter, the retailer reported its strongest sales in electronics, which went up by more than 70%, as customers bought home office items and video games. Shares in Target have also rocketed in the last six months, rising from $0.93 on 16 March to $1.47 on 14 September.

Its strong performance could make Target an excellent choice for investors – as Covid-19 does not seem to be going away. Additionally, its strong digital business, low prices and an extensive product selection, means this growth is unlikely to slow down any time soon, even when the pandemic is over.


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Chipotle Mexican Grill

While restaurant stocks might not seem like the best bet at the moment, Chipotle Mexican Grill could be one to watch. After the stock bottomed out during the coronavirus crash in March, its shares have seen a surge in value, jumping by 179% to $12.97.

Chipotle Mexican Grill has 2,580 Mexican-themed fast food restaurants in the US, as well as 39 international locations. Restaurants across the US had been forced to close as a result of the pandemic, but Chipotle has been swift to adapt. It is one of the few restaurant chains that has successfully managed to pivot to digital sales during the pandemic and is well-placed to ride out the coronavirus storm.

In the second quarter, revenue fell by 4.8% compared to last year, while comparable restaurant sales dropped by 9.8%. However, digital sales grew by a whopping 216.3% year-on-year, accounting for 60.7% of sales for the quarter.

Analysts expect the company to report fiscal second-quarter comparable-store growth of 7.5% in its next quarterly report. The company has plenty of long-term potential and with the strength of its digital deliveries and growing loyalty membership, it looks in good shape to keep serving up the results.


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Qualcomm

US chip provider Qualcomm could be a good move for savvy investors looking for a reasonably priced stock that has significant potential.

Qualcomm is the world’s biggest supplier of mobile phone chips and will benefit hugely when billions of consumers upgrade their phones to 5G. The company forecasts that 750 million 5G smartphones will be shipped in 2022 and that 5G connections will hit one billion the following year – two years faster than with 4G.

Last month, Qualcomm shares surged by 12% to a record high after the company issued a strong forecast for the coming quarter. It also announced a $1.8bn licensing deal with Huawei, settling prior missed payments. The deal with Huawei comes a year after a similar one was signed with Apple. In the quarter ended in June, the chipmaker reported $4.9bn in revenue and after bouncing from coronavirus losses, shares are now pegging all-time highs.

Since July, the stock has risen by over 60% to $14.37 a share, but don’t be put off by this growth. The company’s chips are in Apple, Samsung and Huawei phones, so you could expect it to see further expansion once everyone starts upgrading to 5G.


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