The Delta variant heralds a new wave of restrictions, which may not bode well for companies (and stocks) that have been moving toward reopening as vaccinations have surged, too.
Wall Street loves themes, and the theme that has powered rallies of late might be “business as usual.”
The rising number of COVID-19 cases, the news of “breakthrough” infections that have affected even vaccinated individuals signal that we are not out of the woods yet.
Anecdotal evidence is popping up here and there, with cautionary statements and warnings issued by companies and entertainers, where large gatherings are part of the picture.
For example, musician Stevie Nicks has canceled a string of shows scheduled for this year in the U.S., stating via Twitter post that “the rising COVID cases should be of concern to all of us.”
Separately, Southwest Airlines stated in a filing with the Securities and Exchange Commission that a slowdown caused by the virus will make it “difficult” to turn a profit in the current (third) quarter. In the filing, the company noted that it has seen a deceleration in bookings and an increase in cancellations in August, tied specifically to the Delta variant. That sentiment shows a marked reversal from just a few weeks ago as profits were seen in the most recent quarterly earnings reports (though, notably, commercial travel has still been seeing significant headwinds).
See also: Airlines Are Pushing Back To Profitability, But B2B Travel’s Recovery Is Far From Certain
Visibility Is Lacking
It’s not too far-fetched to think this lack of visibility (and perhaps lack of profitability) will roil some groups on the Street — real estate operators who depend on office and retail reopenings, the retailers themselves and of course travel-related companies (at this writing, airline stocks are mixed at Wednesday’s open).
But if the “reopening” theme will be sorely tested in the weeks and months ahead, the theme of the “great digital shift” remains intact. Restaurants, in particular, have been able to retool and refine their operations. As reported late last month, the latest edition of the PYMNTS Restaurant Readiness Index showed that roughly 70 percent of the average restaurant’s orders are generated online or on the phone — only a slim 30 percent are done in store. This hints at an increasing wariness of diners to linger on site, so to speak.
Read more: Restaurants Now Do 70 Pct Of Sales Online And On Phone, PYMNTS Data Show
It’s important to note that concerns over health and safety are prime motivators making sure that this digital shift remains sticky. In recent PYMNTS surveys, a bit less than half of respondents who have increased their digital activities — even though a majority of individuals queried have been at least partially vaccinated — said they had done so because “they are less likely to be exposed to new variants of COVID-19.”
See also: Pandenomics Study: Many Shifters Prefer Digital Living To The Physical World
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