Throughout March and April, the novel coronavirus pandemic swept across the globe, consumers were under stay-at-home orders, and investors looked for stocks to buy to play the stay-at-home trend.
Names like video teleconferencing giant Zoom (NASDAQ:ZM), remote enterprise work communications platform Slack (NYSE:WORK), e-commerce solutions provider Shopify (NYSE:SHOP) and telemedicine leader Teladoc (NASDAQ:TDOC) come to mind.
All of those stocks are up at least 40% year-to-date.
But over the next few months, investors may want to ditch the stay-at-home trade, and instead look for stocks to play a completely different trend — the “leave-the-home” trend.
That’s because Covid-19 hysteria is moderating everywhere, the global economy is gradually reopening and things are slowly but surely getting back to normal.
Normalization trends will persist. As they do, throughout the summer, restaurants and theme parks will reopen, consumers will get back to traveling and movie theaters and gyms will have visitors again. And as these things happen, those stocks that have been crushed by stay-at-home orders will come roaring back.
Stocks To Buy for Reopening Rally: McDonald’s (MCD)
Year-to-Date Performance: -6.7%
Fast casual giant McDonald’s has weathered the coronavirus pandemic with impressive resiliency. Comparable sales at the company only dropped 3.4% for the first quarter of 2020, as physical store closures and lower traffic volumes were mostly offset by McDonald’s ability to maintain sales through drive-thrus.
As such, MCD stock is down “just” 7% in 2020.
Still, this stock is set to move substantially higher over the next few months as the company reopens its massive store base, with plans for store reopenings in Canada and the UK already in place.
As stores reopen, McDonald’s comparable sales will materially improve. This trend improvement will lay the groundwork for a meaningful recovery in MCD stock over the next few months.
Year-to-Date Performance: -10.5%
Much like McDonald’s, Starbucks has been able to weather the coronavirus storm thanks to its drive-thru locations sustaining inbound revenue for the company.
SBUX stock is consequently down “only” 10% in 2020.
That’s the good news. The better news is that Starbucks is re-opening stores, and more crucially, that those stores are seeing an impressive and rapid recovery in traffic trends. U.S. stores that have reopened are already operating at 60%-plus sales capacity, while China stores are up around 80% capacity.
Over the next few months, more stores will re-open and those numbers will swiftly move towards 100%. As they do, beaten-up SBUX stock will bounce back.
Dine Brands (DIN)
Year-to-Date Performance: -48.2%
While Starbucks and McDonald’s have been able to rely on drive-thru customers to sustain inbound revenue amid the Covid-19 crisis, dine-in giant Dine Brands hasn’t been so fortunate.
Instead, the owner of Applebee’s and IHOP has had to rely on curbside pick-up to drive sales amid physical restaurant closures. Because consumers aren’t as familiar with curbside pick-up as they are with drive-thru, Dine Brands has been hit harder than both McDonald’s and Starbucks.
For the first quarter, comparable sales were down 11% at Applebee’s and down 15% at IHOP. DIN stock is down nearly 50% year-to-date.
This huge sell-off positions DIN stock for a big rebound as restaurants gradually reopen across the country over the next few months.
Reopenings will inject life back into Dine Brands’ top-line. Comparable sales trends will improve meaningfully. Margins will bounce back. Profit growth will come back into the picture. And beaten-up DIN stock will rally in a big way.
Year-to-Date Performance: -28.9%
Much like Dine Brands, dine-in peer Darden — the owner of Olive Garden, Seasons 52, Yard House, Eddie V’s, and many more — has had to rely on curbside pick-up amid the coronavirus pandemic.
The results aren’t great. Quarter-to-date, Darden’s comparable sales are down nearly 50%. Year-to-date, DRI stock is off almost 30%.
But Darden is starting to reopen some restaurants. As of May 17, about half of the company’s dining rooms were open in limited capacity. Management expects that number to climb towards 65% by the end of May.
That number should climb to 100% by the summer. As it does, Darden’s depressed sales trends will meaningfully improve, and DRI stock will bounce back in a big way.
Dave & Buster’s (PLAY)
Year-to-Date Performance: -71.4%
One of the hardest hit stocks amid the coronavirus pandemic has been arcade-dining operator Dave & Buster’s (NASDAQ:PLAY).
Yes, like every other company on this list, Dave & Buster’s has been forced to close all of its locations. But the thing that has Wall Street worried is the consideration that, because Dave & Buster’s is an arcade, where visitors touch everything, this company may be one of the slowest to recover.
That may well be true. But a recovery will still materialize here. The value prop of a social dining experience where parents can eat and drink while kids can play games is simply too strong to be curbed by a pandemic lasting a few months.
As such, traffic trends will rebound at Dave & Buster’s. That recovery will start within the next few months, as locations reopen and consumer behavior gradually normalizes. The start of that business recovery will kick-start a recovery in beaten-up PLAY stock.
Six Flags (SIX)
Year-to-Date Performance: -48.8%
As the economy reopens over the next few months, theme parks will re-open too, and that’s great news for operators like Six Flags, which has seen its stock cut in half year-to-date.
Six Flags is a particularly good theme park stock to buy here because of the company’s theme park geography. In short, the company has plenty of theme parks in those states leading the U.S. reopening.
For example, Six Flags has five theme parks across Oklahoma, Texas and Georgia. Those states are widely considered to be the states which will fully reopen first. They are also widely considered states where consumer behavior will normalize most quickly.
Connect the dots. A significant portion of Six Flags parks will open up over the next few months, and those parks should see reasonably strong attendance levels. If so, then SIX stock could rebound significantly in the summer.
Year-to-Date Performance: -46.5%
Much like Six Flags, SeaWorld is another theme park stock to buy because of its favorable geographic presence with respect to American reopening.
SeaWorld has a large presence in three places: San Diego, San Antonio, and Orlando. The San Diego park may not open for a while, given California’s more stringent reopening policies. However, the San Antonio and Orlando parks may reopen quite soon, as Texas and Florida are both states already partially re-opened.
As such, two of SeaWorld’s three big parks will re-open by the summer. It’s even possible that all three are open by summer. That’s versus none today.
The implication is that SeaWorld’s numbers will improve significantly between now and August. Such significant improvement will help SEAS stock world claw back some of its near 50% drop so far in 2020.
Cedar Fair (FUN)
Year-to-Date Performance: -44.5%
Another theme park stock to buy now is Cedar Fair.
While Cedar Fair doesn’t have the same geographic tailwinds as Six Flags and SeaWorld — Cedar Fair’s parks are all across the country — the company does have something else going for it.
When you look at Cedar Fair’s portfolio of parks, it becomes clear that these aren’t national landmark parks that people are flying across the country to see. These are regional theme parks, the kind that people drive a couple hours to visit for a day.
In this sense, there are significantly lower barriers to Cedar Fair regaining normal traffic volumes compared to other theme parks, because a return to normal for Cedar Fair doesn’t require consumers to get back on planes.
As such, economic normalization over the next few months will spark a rapid recovery in Cedar Fair’s traffic volumes, which will in turn spark an equally rapid recovery in FUN stock.
Year-to-Date Performance: -18.6%
Disney is yet another theme park stock to buy now. It’s also a media stock to buy now. And an advertising stock to buy now.
Long story short, pretty much every business vertical at Disney — streaming aside — was hit hard by the coronavirus pandemic. The company’s theme parks were shut down. Movie theaters closed. Live sports were cancelled.
All of those trends will reverse course over the next few months. It increasingly looks like DisneyWorld will reopen fairly soon. Movie theaters in certain states already have the green-light to reopen. And the NBA and MLB should return to live TV by the summer.
As these trends reverse course, DIS stock will go from being down big — losses of nearly 20% so far this year — to being up big. Buying ahead of this major reversal seems like the smart move.
Planet Fitness (PLNT)
Year-to-Date Performance: -19.8%
Across Georgia, Utah, Texas, and Florida, gyms are back up and running. That’s great news for gym operator Planet Fitness, the only publicly traded gym operator in the U.S. (and therefore the only pure-play on gym re-openings).
Of note, where its gyms are already open, Planet Fitness’ CEO recently told CNBC that traffic levels and membership growth trends are in-line with where they were a year ago.
If this trend holds true across the country, then by the end of the year, Planet Fitness could be operating at the same traffic and sales volume the company saw at the end of 2019.
At the end of 2019, this was a $75 stock. Today, it’s a $60 stock.
As such, PLNT stock appears to have big upside potential over the next few months as gyms across the country re-open and workout enthusiasts rush back to the gym.
Live Nation (LYV)
Year-to-Date Performance: -36.2%
Amid the coronavirus pandemic, events ranging from music festivals to conferences were cancelled. That presented an unpredictably enormous headwind for events planning platform Live Nation.
But here’s the thing. Consumers love going to events, concerts, and festivals. So much so that two things will happen over the remainder of the year.
First, as soon as regulations allow, concerts and festivals will come back. And consumers will go to those concerts and festivals in big numbers, both because their love for these events outweighs their fear of the virus (for the most part), and because the 20s/30s cohort attending these events is considered the lowest-risk group for coronavirus fatality.
Second, before regulation allows for concerts to come back, LiveNation will pioneer the concept of “drive-in” concerts, where people go to concerts in their cars. This has already been done with a Keith Urban concert which was a wild success. Future drive-in concerts will succeed as well, and LiveNation will be able to sustain itself until real concerts come back.
Big picture: this big dip in LYV stock is a near-term phenomena. Over the next few months and years, LYV stock will bounce back.
MGM Resorts (MGM)
Year-to-Date Performance: -51.6%
The gambling empires of Las Vegas and Macau have essentially shut down amid the coronavirus pandemic. And that has dragged MGM stock down more than 50% in 2020.
But this pain is temporary. Macau casinos have already re-opened.
Sure, it was a rocky start. But traffic trends are slowly recovering. Las Vegas will follow a similar trajectory in the coming months. A rocky reopening followed by a gradual recovery.
In other words, MGM has already hit rock bottom. Over the next few months, its casinos and hotels will reopen, traffic trends will improve and the numbers will improve. As all that happens, beaten-up MGM stock will rebound.
Wynn Resorts (WYNN)
Year-to-Date Performance: -39.4%
The bull thesis on Wynn Resorts is nearly identical to the bull thesis on MGM Resorts.
That is, Wynn has already hit fundamental rock-bottom. Its Macau casinos are open and presumably recovering. Its Vegas properties will reopen soon, and recover over the summer.
Traffic volumes. Revenues. Profits. All of those metrics will trend higher in the coming months as Las Vegas and Macau come back to life.
And WYNN stock — which is down 40% year-to-date and trading at an all-time-low valuation on a sales basis — will stage a huge rebound rally.
Year-to-Date Performance: -56.9%
With consumers traveling nowhere and airfare demand at its lowest levels ever, airliners across the globe aren’t buying new planes. That’s awful news for Boeing, the world’s largest airplane maker.
BA stock is down more than 50% year-to-date on sales that dropped 26% year-over-year last quarter.
But depressed airline demand is a temporary phenomena.
Air travel has become an integral part of the fabric of modern society. As such, it has staying power. The Covid-19 pandemic and related consumer hysteria will pass. The value prop of air travel — of being able to see the world, relatively quickly and affordably — will not.
Sure, the recovery will be choppy. But it will happen. And as it does, airlines will start buying big planes again and Boeing’s sales will start growing again. BA stock will naturally bounce back.
Booking Holdings (BKNG)
Year-to-Date Performance: -21.7%
Much like the bull thesis on Boeing, the bull thesis on Booking Holdings is predicated entirely on the idea that global airline and travel demand will meaningfully rebound over the next few years.
Booking Holdings, the owner of various online travel price aggregators such as Booking.com, Priceline and Kayak, has been hit hard by the global travel depression.
New room bookings dropped 85% year-over-year in April. BKNG stock has reasonably shed more than 20% in 2020.
But global travel demand will rebound. Not all at once, of course. Gradually over the next few years. But consumers will forget about this pandemic, get over virus-related fear, and act on their pent-up demand to see the world. And as they do, traffic and bookings through Booking’s ecosystem will recover.
BKNG stock will recover, too. Again, gradually, not all at once. But it will recover.
Year-to-Date Performance: -27.1%
Lather, rinse, repeat. The bull thesis on online travel marketplace Expedia is also about a rebound in global travel demand.
Expedia has been killed by the pandemic. Gross bookings dropped 85% during a stretch from late March into April. Cancellations were also very high during that time.
EXPE stock has consequently plunged nearly 30% year-to-date. But global travel demand will rebound. Families won’t forever celebrate summer break with Zoom sessions.
As global travel demand does gradually rebound over the next few years, EXPE stock will gradually rebound as well. All the way back to all-time highs, and probably even higher.
American Airlines (AAL)
Year-to-Date Performance: -65.3%
Perhaps the best stock to buy for investors who want to play the global rebound in travel demand is American Airlines.
Much like peer airline stocks, AAL stock has been killed by the coronavirus pandemic. Year-to-date, shares are down more than 65%. In fact, AAL stock currently trades at its lowest level since mid-2012.
Global travel demand will recover over the next few years. Sure, American Airlines’ ability to profit off that rebounding demand will be hampered by the absence of buybacks and the addition of huge new cleaning costs. As such, American Airlines profits likely won’t return to peak levels anytime soon, meaning AAL stock won’t return to peak levels anytime soon, either.
But it is reasonable to assume that AAL gets back to 50% peak profit levels. Peak profits were about $5 per share. At $2.50 per share with a historically normal 7-times forward earnings multiple, you’re talking about a $17.50 stock.
That’s more than 75% above where shares currently trade. In other words, even a gradual and limited recovery in global travel will spark a huge rebound for AAL stock.
Year-to-Date Performance: -30.2%
A rebound in global travel demand won’t just spark a rebound in airline stocks. It will spark a rebound in all travel-related stocks, including hotel stocks. And that’s great news for Hilton.
Hilton’s RevPAR (or revenue per available room, which is the most important business metric for hotel operators) dropped 23% in the first quarter and 57% in March. That metric is expected to drop roughly 90% for April.
But April was likely rock bottom for Hilton. In May, several economies across the globe have reopened. Air travel traffic has recovered. And hotels in certain “open economies” have seen a surge in demand.
All of that means that Hilton’s RevPAR trends likely improved in May. They will keep improving throughout the summer. Such improvements will power a continued recovery in HLT stock.
Year-to-Date Performance: -39.2%
Much like Hilton, Marriott is another hotel stock to buy now for investors who want to play the gradual recovery in global travel demand.
With air travel traffic and hotel demand in recovery mode, Marriott’s depressed operational trends — including a 90% RevPAR drop in April — will reverse course.
As they do, MAR stock will rebound, and not by a little but by a lot, especially given that MAR is down about 40% YTD and trading at its lowest trailing sales multiple since 2015/16.
Consequently, MAR stock has big upside potential over the next few months as hotel demand rebounds.
Year-to-Date Performance: -70.8%
Arguably the company hardest hit by the Covid-19 crisis, large cruise line operator Carnival appears positioned for a huge rebound in 2021.
CCL stock is down more than 70% year-to-date, presently trading at its lowest price tag since 1996. The global cruise industry has completely shut down and worries remain over whether or not consumer demand for cruises will ever rebound.
Those worries are overstated.
There are a lot of consumers out there who apparently like low prices more than they fear Covid-19. As Carnival cut cruise prices to stoke demand, bookings have soared. August 2020 cruise bookings are up 200% year-over-year. That trend will only accelerate.
In 2021, Carnival’s cruises will more widely re-open, the company will push low prices and huge discounts down consumers’ throats and bookings will soar. As they do, beaten-up CCL stock will rebound in a big way, making CCL one of the best buys to play a big get-out-of-the-house rally.
Year-to-Date Performance: -40.0%
Automobile stocks are among some of the best stocks for playing an economic recovery. And in that group of automobile stocks to buy, one of the more attractive names is Ford.
As goes the economy, so go automobile sales. When times are good, consumers have extra money and they buy new cars. When times are bad, consumers don’t have money and they stick with their old cars.
Right now, one could strongly argue that we are on the cusp of times going from bad to good, as peak pandemic hysteria passes, the global economy reopens, and labor markets recover.
As all that happens over the next few months, automobile sales will rebound. Ford’s sales will rebound even more-so, because the company is set to unveil its new Mustang Mach-E in 2021, part of the broader electrification movement at Ford.
Demand for Ford’s new electric vehicles will soar against the backdrop of rebounding auto sales, paving the path for a multi-year streak of sales and profit growth at the company. This streak will power Ford stock way higher from today’s depressed levels.
Urban Outfitters (URBN)
Year-to-Date Performance: -36.5%
Malls everywhere are closed, so it should be no surprise that mall-based retailer Urban Outfitters had an awful first quarter.
Net sales for February, March and April dropped 32%, paced by a 28% drop in comparable sales. The gross margin rate fell to a measly 2% (from 31% for the year-ago quarter).
Gross profits plunged 96% year-over-year. Worse yet, operating expenses fell by “only” 8%, so Urban Outfitters experienced significant opex deleverage. The expense rate ballooned from 27% a year ago, to 36%.
Luckily, this is all temporary pain.
On the earnings call, management disclosed that traffic trends are improving. About 40% of Urban’s stores are now re-open. When those stores first re-opened, comparable sales growth was trending in the down 80% range. Each week since then, traffic trends have improved. Now, that number stands around down 60%.
Sure, down 60% is still a huge drop. But if the current trend persists — and it should given broader economic normalization trends — then Urban Outfitters will be back at the flat-line within the next few months.
As Urban Outfitters makes progress back towards “normal” sales levels, URBN stock will rebound back towards “normal” stock price levels.
Bed Bath & Beyond (BBBY)
Year-to-Date Performance: -61.5%
Much like every other physical-first retailer, Bed Bath & Beyond has been killed amid the coronavirus pandemic as its stores have closed and consumers have cut back on discretionary spending. BBBY stock is down more than 60% year-to-date.
But make no mistake: BBBY stock is one of the best stocks to buy here and now.
Sure, Bed Bath & Beyond is going slowly with its reopening plans. Management doesn’t plan to reopen any stores until June. But the company will reopen stores throughout June and July. As they do, the company’s depressed sales trends will rebound.
And not by a little, by a lot, because new management is taking all the right steps to improve store performance through remodeling and in-store technology integrations.
Thus, in the back-half of 2020 Bed Bath & Beyond’s sales trends should meaningfully improve. As they do, ultra-depressed BBBY stock will bounce back.
Year-to-Date Performance: -36.5%
Will consumers ever go to the movie theater again? Yes. And when they do, beaten-up AMC stock will rebound in a big way.
More than half of Americans say that they would return to a movie theater within the first month of opening if said theater implemented new sanitizing measures and deployed staggered seating. And that survey was conducted in late April, at the height of the Covid-19 pandemic.
As the peak of pandemic hysteria moves further and further into the rear-view mirror, the number of Americans willing to go to movie theaters will rise from just over 50%, to closer to 80% or even higher. Broadly, that means AMC’s sales should recover to about 80% of its previous volumes, and AMC stock should thus rebound to 80% of its previous levels.
Before Covid-19, AMC stock was up around $7.50. Eighty percent of that implies a $6 price tag — up more than 30% from where the stock trades today.
Year-to-Date Performance: -65.5%
Last, but not least, on this list of stocks to buy for a big get-out-of-the-house rally is off-mall, off-price retailer Kohl’s.
Kohl’s confirmed that its business was killed amid the Covid-19 pandemic with its first-quarter earnings report. First-quarter sales plunged 43.5% and gross margins compressed by nearly 20 percentage points. A narrow adjusted net profit in the year ago quarter swung to a wide adjusted net loss this quarter.
It’s obvious that Covid-19 killed Kohl’s in the early part of 2020. What’s less obvious, however, is that KSS stock is ready to rip higher.
The worst is over. Pandemic hysteria is dying down, consumer behavior is normalizing and Kohl’s is re-opening stores. That means first-quarter numbers are as bad as the numbers are gonna get. Second, third, and fourth-quarter numbers will be much better.
Meanwhile, Kohl’s is attractively positioned to survive the “Retail Apocalypse” longterm, thanks to the company’s off-mall and off-price nature, strong digital platform and massive loyalty program.
Those two truths make KSS stock — down nearly 70% year-to-date — seem woefully undervalued here and now. Into the end of the year, this stock should rebound in a big way.