More than a year into the pandemic, the reopening theme has been one of the most popular ways to play the economic recovery. Many companies battered by closures and restrictions have seen their stocks roar back to pre-COVID levels. The climb back for others has been slower.
Restaurants, theme parks, and hotels have been among the biggest gainers thanks to healthier operating conditions. Casinos, airlines, and cruise lines have been subject to slower business activity due to ongoing restrictions or tepid consumer demand.
Here we look at three companies that fall into the latter category. They have yet to see the full benefit of pent-up demand—and therefore, their stocks may have plenty more room to run.
Is the Boyd Gaming Dip a Buy Opportunity?
Boyd Gaming (NYSE:BYD) has recovered nicely off its March 2020 bottom. In fact, the casino operator ran above $70 earlier this year on expectations of improving demand for leisure and entertainment venues and the growth prospects of it digital gaming platform.
Now trading about $10 off its record high, Boyd Gaming is an attractive reopening play for investors that missed the early innings of the rally. The company's casino properties located across 10 gambling-friendly states are seeing improving traffic trends in conjunction with U.S. vaccination progress. Although it isn't expected to make a full recovery until 2022, Boyd has other growth catalysts to bet on.
Boyd's online gaming platform is reason enough to buy into the stock. As more states have moved towards legalizing online sports and casino betting, Boyd has been aggressively investing in its digital offerings. Its partnership with popular sports betting platform FanDuel to launch its Stardust online casinos put it in an advantageous position to grow alongside the state-by-state expansion of online gaming.
More than just a quick buck, Boyd Gaming is a reopening play with longer-term growth prospects—and well worth the roll of the dice.
Is Southwest Airlines a Good Reopening Play?
Southwest Airlines (NYSE:LUV) stock finished last year down 14%. That wasn't bad considering the woes of the travel industry. For the first time in 44 years, the low fare carrier wasn't able to generate a profit as government restrictions kept demand grounded.
This year is starting to look like the mirror image of 2020. Not only are Southwest shares up 14%, but passengers have started to return to the friendly skies. Business travel has remained muted, but homebound travelers worldwide are now booking travel at higher levels than the company anticipated. Management noted that April and May revenues were tracking ahead of expectations and that leisure trips were being booked into June and July. This bodes well for the upcoming second quarter results and outlook.
There may not be an airliner in a better financial position to reap the rewards of pent-up travel demand. Well known for its strong balance sheet, Southwest has more than $15 billion in liquidity that will allow it to pursue expansion opportunities at its leisure as demand returns. It has already started to do so by adding more destinations to its travel map—18 since last year.
Southwest has historically been well-liked by income investors. While the dividend is still on hold, eventually this too will return, offering investors a nice combination of growth and income. Investors that "wanna get away" with buying Southwest before it takes off for the next leg of its flight should board here.
Was the Carnival Stock Selloff an Overreaction?
Carnival Co. (NYSE:CCL) stock had been cruising along nicely until this week's announcement of an add-on equity offering. The cruise line operator said it plans to sell as much as $500 million worth of its stock.
News of further dilution is never greeted favorably by the market, and that is why we've seen some investors jump ship. It is especially not well received considering Carnival has already raised $2.5 billion to stay alive during a year of lockdowns and restrictions.
However, a closer look at this funding round reveals a silver lining. The proceeds of the sale are primarily going to be used to buy back the company's shares that trade on the London Stock Exchange. In other words, Carnival management believes its shares are undervalued and that better times are ahead. More specifically, the company only plans to issue the new shares when the UK shares are trading at a discount to their NYSE counterparts. The rather shrewd maneuver is akin to a profitable day trade and would make even the best house flippers proud.
While the cruise line industry appears to be drowning in debt, the turning point may be near. Investors need to look below the surface on this capital raise. While Carnival still has a long recovery ahead, what sunk the stock on Monday is not a reflection of worsening business conditions, but a sign that the company may finally be getting its ducks in a row.
Before you consider Carnival Co. &, you'll want to hear this.
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