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Health Care Stocks Aren't Alone in Getting a Coronavirus Boost

By Mike Cherney 

SYDNEY -- As the coronavirus spread in China and then to more countries around the globe, dairy executive Geoff Babidge noticed a curious development: sales of his company's infant formula were unexpectedly strong.

A2 Milk Co., the New Zealand-based company that Mr. Babidge leads, responded to the demand by ramping up production and using ships and planes to send more product to China, where he says customs officials give it a priority status similar to medical supplies.

The virus has infected more than 80,000 people globally and killed about 3,000, disrupting global supply lines and knocking stock markets off course. Aside from health-care firms researching possible treatments to the virus, a handful of other companies in sectors ranging from dairy to videoconferencing to online gaming could also benefit financially from the epidemic.

A2's Australia-listed shares surged 5% on Thursday when the strong demand was disclosed and over the entire week, the stock fell just 1.3% as global markets had their worst run since 2008. Mr. Babidge said customers were buying the infant formula both in stores and online, an attractive option for parents worried about contracting the virus in crowds or while standing in long lines.

"We are here to really do whatever we can to support Chinese consumers," Mr. Babidge said in an interview. "Our sales are reflecting the fact that we are responding to customer needs, and we'll continue to do that."

Elsewhere, shares in San Jose, Calif.-based Zoom Video Communications Inc., which offers videoconferencing services, rose 3.2% this week. The company is providing free services to mental health charities and medical institutions, Chinese universities are using a Zoom platform to keep classes going and doctors from more than 1,000 public hospitals in China are using its video meetings to remotely diagnose patients, Chief Executive Eric Yuan wrote in a blog post on Wednesday.

The company also scrapped its 40-minute time limit on meetings with more than two participants for users in China who aren't paying a fee, Mr. Yuan said in the post. Zoom declined to comment beyond Mr. Yuan's post.

Shares in Peloton Interactive Inc., which makes fitness bikes and also streams fitness classes online, rose nearly 5% for the week after an analyst suggested the epidemic could increase sales from fitness buffs who might be concerned about contracting the virus at the gym. Peloton declined to comment on the stock move.

Earlier in February, some online gaming and entertainment stocks in China jumped as investors bet that extended holidays would boost their earnings. Tencent Holdings Ltd. even hit a 20-month high at one point, given that Chinese consumers were using various news and social-networking platforms -- including Tencent's popular WeChat messaging app -- to keep abreast of virus-related developments.

Tencent's shares have given up some of those gains recently, however, and some Chinese tech companies have warned that the virus could have a negative impact on their businesses. Alibaba Group Holding Ltd. has said its ability to deliver packages has been hampered by the many workers who are stranded at home while factories remain closed. And search giant Baidu Inc. warned on Friday that its first-quarter revenue could plunge 5% to 13% as the outbreak hurts many sectors that fuel its core advertising business.

Dermot Ryan, a portfolio manager at AMP Capital in Australia, said he could see the appeal of infrastructure stocks that tend to hold up better during downturns. He said his firm is also looking to add stocks that could help with the governmental pandemic preparations, like retirement-home operators.

Mr. Ryan also said companies that diversified their manufacturing and procurement operations out of China due to the trade war with the U.S. could benefit from the coronavirus epidemic.

Back at a2 Milk, Mr. Babidge said it isn't clear whether the revenue boost during January and February will continue in the coming months. He also didn't know if a2 Milk has attracted new Chinese consumers, or if it was repeat customers stockpiling product that they would normally have bought in March and April, a scenario which could mean falling sales in the next couple of months.

"This is not about us profiteering from what is a calamity in China," said Mr. Babidge, adding that his company has donated cash and product in response to the coronavirus. "It's about us being able to respond to consumer demand, be it people who know our product or people who can't access other brands."

--Shan Li, Xie Yu and Joanne Chiu contributed to this article.

Write to Mike Cherney at mike.cherney@wsj.com

 

(END) Dow Jones Newswires

February 29, 2020 07:19 ET (12:19 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.