The outbreak comes amid the Lunar New Year holiday, the Chinese-speaking world's busiest travel season
Shares of antibiotics developer Novavax (NVAX) are on the rise on Tuesday amid reports of a new respiratory virus that has infected almost 300 people and killed six. Also higher are Inovio Pharmaceuticals (INO) and BioCryst Pharmaceuticals (BCRX) as the Chinese government confirms two cases of human-to-human transmission. Meanwhile, Las Vegas Sands (LVS), Wynn Resorts (WYNN) and Melco Resorts (MLCO), as well as several travel stocks, are under pressure on investors’ concerns over the potential impact on tourism as the virus continues to spread.
NEW CORONAVIRUS: Six people have died and 291 have been infected in China, according to the National Health Commission, as a result of an outbreak of a new respiratory virus in the country that has also reached four other countries and territories. Meanwhile, Chinese government expert Zhong Nanshan confirmed fears on state television on Monday that this new type of coronavirus can spread from human-to-human.
Several countries have adopted screening measures for travelers from China, especially those coming from Wuhan where the virus appears to have originated, as nations worry about a global outbreak similar to SARS, another coronavirus that spread from China to over a dozen countries back in 2002-2003.
The coronavirus family includes those that cause the common cold. However, some found in animals like bats or camels have evolved into severe illnesses such as SARS, or severe acute respiratory syndrome, and MERS, Middle East respiratory syndrome.
EUROPEAN LUXURY GOODS SECTOR EXPOSURE TO CHINA: In a research note to investors, JPMorgan analyst Melanie Flouquet noted that the European luxury goods sector is also down on Tuesday as investors grow more concerned over reports of an outbreak of a new coronavirus in Wuhan, China. Noting that she does not believe the sector can afford much negative news at the current level of valuation, the analyst highlighted that shares of LVMH (LVMUY) were down 13% from February to April 2003 due to the SARS outbreak at the time.
WHAT'S NOTABLE: In a research note to investors, Morgan Stanley analyst Thomas Allen downgraded Las Vegas Sands to Equal Weight from Overweight, with a $72 price target on the shares. He continues to see the stock as "the mass market play on Macau" and his Macau mass market growth forecast for 2020 trails what Consensus Metrix suggests is the U.S. analyst forecast average. Allen also noted that risk mass growth could come in even lower than his 11% growth forecast as net rooms growth will be essentially flat and hotel occupancies have surpassed Vegas. Given his base case of a VIP recovery into 2021, he now prefers Wynn Resorts.
PRICE ACTION: In morning trading, shares of Novavax, Inovio and BioCryst have jumped about 45%, 10% and 6%, respectively. On the flip side, Macau-exposed Las Vegas Sand, Wynn Resorts and Melco Resorts have dropped over 4%, 5% and 7%, respectively. Also lower are airline names like Delta Air Lines (DAL), American Airlines (AAL) and China Southern Airlines (ZNH), and cruise operators Carnival (CCL) and Royal Caribbean (RCL).