The Impact of COVID-19 on 5G TSX Stock Returns

Canadian investors should buy BCE Inc (TSX:BCE)(NYSE:BCE) stock before the global stock market completes its rebound after the Covid-19 crisis.

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We all expected 5G technology stock to soar in 2020. Unfortunately, the COVID-19 pandemic weakened the returns from 5G stock like BCE Inc (TSX:BCE)(NYSE:BCE). On the bright side, BCE is still outperforming the S&P/TSX Composite Index and now you have the chance to gain more on new 5G stock positions.

In March, the stock market hit historic lows at the beginning of the coronavirus crisis. Luckily, the stocks regained some of those losses and prices now appear to be more stable. The S&P/TSX Composite Index lost 14.76% of its value year to date.

While BCE stock’s price moves are highly correlated with the index, it ultimately outperformed the S&P with a loss of only 7.58% this year.

BCE Chart

Public sentiment of BCE stock

The bad news is that BCE stock doesn’t have the best reputation at the moment, which might impact the stock price. Do you remember the Huawei controversy before COVID-19 stole the headlines?

In summary, the United States raised alarms regarding potential Chinese espionage in 5G parts provided by the firm Huawei. Canada also arrested Huawei’s Chief Financial Officer, Meng Wanzhou, in 2018, in response to a U.S.-initiated warrant.

The U.S. originally issued an arrest warrant for Wanzhou for transacting funds in U.S. banks from Skycom, a Huawei-related firm in Iran. Since then, the U.S. has expanded the charges to include ignoring sanctions against North Korea in some business deals. The COVID-19 panic disrupted Wanzhou’s extradition hearings.

In January 2020, BCE’s new CEO Mirko Bibic applauded Huawei’s equipment as “top notch” and reviewed them as a “great partner.” The comments were aimed at the pending Huawei 5G decision. Some Canadians were dissatisfied with the Bibic’s stance on the issue and called for a boycott against the company.

Canada remains one of the remaining countries that has yet to ban Huawei equipment from the 5G rollout.

On the other hand, China has been very helpful in filling crucial mask shortages during the lockdown. Public perception forced Canada and France to release statements assuring the world that help from China would not lead to a quid pro quo scenario in the 5G business contract decisions.

It is doubtful that the mask shipments will flip consumer perceptions over the safety of Huawei 5G equipment in a meaningful way so as to impact the price of BCE stock.

How has Covid-19 impacted BCE stock?

As Mike Crawley, an Ontario reporter with CBC news and the President and CEO of Northland Power, pointed out, Bell Media receives a sizeable portion of its revenue from outdoor advertising; few people are benefiting from outdoor activities during the pandemic.

Bell Media says Astral’s $250 million in revenue came from 31,000 outdoor advertising sites. This is from the BCE annual report, page 73.

— Mike Crawley (@CBCQueensPark) March 10, 2020

Depending on the expected length of the crisis, many of these firms may choose to contain costs by reducing advertising expenses. Advertising outdoor activities when people are staying inside their homes wouldn’t be fiscally responsible.

Still, the chances that Bell Media will emerge an outperformer in the stock market even in the event of a recession is strong. Your retirement portfolio will definitely benefit from a purchase of BCE stock before the market completes its rebound.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Debra Ray has no position in any of the stocks mentioned.

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