The coronavirus (COVID-19) outbreak has thrown global markets into turmoil. Amid the increasing volatility, investors have been quick to panic sell their stocks and take profits. Apart from the tragic toll on human life, global markets have been sold off on growing investor concerns on how the coronavirus outbreak could impact global growth. Reuters reports that, as the epicentre, China's growth is expected to slow to 4.5% for the first quarter of 2020, which is its lowest pace of growth since the GFC.
Despite the doom and gloom, selling on the back of the coronavirus outbreak could present great long-term buying opportunities. A recent article in the Australian Financial Review shed some light on the ripple effect of coronavirus on global growth. In the medium-term, analysts have advocated that disease outbreaks have a negligible impact on economic activity.
Here are 2 ASX stocks that have been sold-off on heightened coronavirus fears and could potentially be long-term buying opportunity.
Treasury Wine Estates Ltd (ASX: TWE)
Treasury Wine relies heavily on demand from the Chinese wine market, generating more than 40% of its total profits from Asia. As a result, the company's share price has tanked more than 36% since the end of January.
Yesterday, the Australian winemaker downgraded its full-year profit guidance for the second time in a month. Treasury cited in a market release that "consumption across discretionary categories in China has been significantly impacted through February and this impact on consumption is expected to be sustained to at least through March."
Despite delivering a strong performance into the Chinese New Year, Treasury has seen a marked decline in consumption in China and management are yet to fully determine the complete financial impact of the coronavirus outbreak.
Corporate Travel Management Ltd (ASX: CTD)
Corporate Travel has also been impacted by the coronavirus outbreak, with the company's share price down more than 26% since the end of January.
The travel specialist highlighted the negative impact of coronavirus on its performance by downgrading its guidance for the second half. Corporate Travel revised its guidance for underlying FY20 earnings before interest, tax, depreciation and amortisation to be between $125 to $150 million, down 16% from the prior corresponding period.
The forecasted downgrade in earnings is the result of numerous data points indicating that coronavirus will have a material impact on travel demand for the next few months. Despite this, analysts are optimistic that the coronavirus outbreak will have a one-off impact on Corporate Travel.
Should you buy?
In my opinion, selling on the coronavirus outbreak could present investors with great long-term buying opportunities. However, this does not meant investors should bust out of the blocks and buy up everything that is oversold. The analogy of 'catching a falling knife' applies to such situations.
The World Health Organization remains cautious on the future of the coronavirus outbreak. I think a prudent strategy would be to keep these stocks on a watchlist and wait for the situation to resolve and let positive price action dictate before making an investment decision.
