There are early signs the ‘COVID stocks hangover’ is a thing
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COVID-19 turned out to be a godsend for ASX stocks that were either the right place at the right time or quickly pivoted – but for how much longer?
In recent days signs have been emerging that the glory run might be coming to an end.
Harris Technology (ASX:HT8) is a pertinent example of a “COVID stock”. The online retailer has rocketed from 0.9 cents in January to 12 cents this month.
It’s run began in April when it launched a range of hygiene products. Melbourne’s mandatory face coverings provided a further boost to the business before the company even commented on the situation.
Harris confirmed to shareholders yesterday it has in fact seen a surge in sales.
August sales were $3.3 million – up 411 per cent from August 2019 – and Harris credited that to Victorian government regulations.
“HT8 was able to seize the business opportunity in light of the Victoria COVID-19 second wave in its Pro-Hygiene business,” declared CEO Garrison Huang.
While the company said it was confident it could continue its growth post-COVID, it said nothing was guaranteed.
“The directors are cautious that sales of Pro-Hygiene products may slow down as the Victorian Government and other Australian states’ COVID-19 restrictions are eased,” it said.
Remember back in January and February when only businesses with strong Chinese focus were seeing a COVID-19 impact?
One China-exposed stock that actually grew in the March quarter was A2 Milk (ASX:A2M) – by 20 per cent.
A2 Milk and other food stocks were able to keep operating during lockdowns as essential businesses and had markets other than China to fall back on.
But A2 fell yesterday after telling shareholders it noticed a fall in the daigou trade.
Much of this was attributable to reduced tourism from China and international student numbers. But it noted Victoria’s Stage 4 restrictions had an additional impact expected to last for some months yet.
“We are now witnessing a contraction in the daigou channel beyond our previous expectations and without the replenishment orders that would be typically anticipated at this point,” it said.
“The disruption in the daigou channel is impacting our September sales and it is anticipated that this will continue for the remainder of the first half of FY21.”
Nonetheless it said a single channel logistics issue and underlying demand in China remained strong.