Novel coronavirus cases may be on the rise again. But, that may not necessarily mean we aren’t slowly moving “back to normal.” Sure, social distancing and mask orders have changed things up a bit. But, with lockdowns ebbing from coast-to-coast, Americans are slowly getting back to old routines.
This means a return to activities largely put on hold due to the outbreak, like date nights. That means stronger prospects for a wide variety of sectors still hit hard by Covid-19.
Sure, many badly hit stocks have bounced back close to their pre-pandemic price levels. But others? They remain stuck near their lows. And while there’s no guarantee these battered stocks will bounce back fast, with a “second wave” priced in, now may be the time to buy.
So, which ones should be on watch list? Consider these five consumer stocks names to buy, as outside activities like date nights come back in vogue:
- Cinemark Holdings (NYSE:CNK)
- Darden Restaurants (NYSE:DRI)
- Lyft (NASDAQ:LYFT)
- Live Nation Entertainment (NYSE:LYV)
- Regency Centers (NASDAQ:REG)
Consumer Stocks: Cinemark Holdings (CNK)
Movie theater chain Cinemark tried to stage a comeback over the summer. But with bad news from its two major rivals, its shares have trended lower since Labor Day.
And that’s no surprise. Rival Regal Cinemas temporarily closed all its locations. Its other rival, AMC Entertainment (NYSE:AMC), is facing a potential bankruptcy, many may fear the same could happen here, and have sold off CNK stock.
Yet, the situation for Cinemark may not be as dire. After raising $400 million in August via the sale of convertible bonds, the company has enough cash to get through 2021. By then, the cinema business may be much closer to the “old normal” than the situation today.
Granted, that doesn’t necessarily mean a fast return to the high water mark. But, if the environment improves for movie theaters, and its rival avoid financial ruin, this hard-hit stock could produce swift returns for investors. Watch out for another pullback to March’s lows. Yet, as a way to play the return of “date night,” this remains a solid opportunity.
Darden Restaurants (DRI)
After tumbling in March’s coronavirus crash, DRI stock staged quite the rebound in the months that followed. Shares in the chain restaurant giant are up nearly four-fold from their lows. But, more potential gains could be on the table. Even if the recent surge in Covid-19 cases means more tough times for the restaurant industry.
As CNBC pundit Jim Cramer recently remarked, Darden has the balance sheet and scale to continue weathering the storm. Once we are out of the woods with Covid-19, this could mean an even greater bounce-back for the Olive Garden parent.
How so? While this restaurant operator can survive a continued pandemic, the same can’t be said for smaller operators. That could mean decreased competition once the current tough environment subsides.
Like with Cinemark, watch out for another big pullback. Investors have priced in a swifter recovery in recent months, and a near-term correction could be in the cards. But, one of the highest-quality, hard-hit consumer stocks, keep DRI stock on your watch list.
When you think “date night,” the first image in your mind may be going out to dinner, seeing a movie, or some other type of nightlife activity. But, a “return to date night” benefits not just these industries. Ride-sharing services like Lyft were hard-hit by the sudden lockdown of outside activities.
But, as Americans adapt to the “new normal,” things could improve for LYFT stock. While up from its lows, shares remain far below their pre-pandemic price level.
Shares today change hand around $26 per share, versus prices above $50 per share before the outbreak first made headlines. Sure, Lyft has other headwinds besides Covid-19. Issues with profitability, a rich valuation, and the specter of higher labor costs are other reasons why investors have shunned the stock this year.
That being said, the second-largest ride-share stock may be a worthwhile “bottom-fisher’s buy” at today’s prices. While Covid-19 cases are on the rise, it’s debatable whether states will impose draconian shutdown orders once again.
Also, the labor situation for LYFT stock could turn in its favor thanks to an upcoming ballot proposition. Last year, California passed AB5, legislation that affects how ride-share companies classify their workers. But, if California votes for Proposition 22 on Nov. 3, the company can avoid having to classify its drivers as employees rather than as independent contractors.
There are a lot of moving parts here, but with improvements on the horizon, now may be the time to hop into Lyft shares.
Live Nation Entertainment (LYV)
The full return of date nights, and nightlife in general, would be a big boost to Live Nation. Sure, this stock hasn’t been as hard-hit as some of the others listed here. Shares have more than doubled off their March lows. But, trading for around $55 per share, versus over $70 per share pre-outbreak, there’s solid upside if we continue on the path back to the “old normal.”
But, that’s not to say it’s a slam dunk. A poor balance sheet and weak live entertainment demand don’t bode well for LYV stock. Add in the fact it could be a while before it gets back to profitability, and I agree it’s a bit illogical that shares have bounced back as high as they have in recent months.
Still, this date night stock may be a great buy on a pullback. If another wave of the pandemic hits consumer stocks like this one, shares could fall back to a more reasonable entry point.
While it’ll likely be many years before we are “back to normal,” life goes on, and interest in live entertainment won’t be permanently damaged. With this in mind, LYV stock may be a great long-term play on a major pullback.
Regency Centers (REG)
Sure, it’s odd to include a REIT (real estate investment trust) on a list of consumer stocks. But hear me out. Regency Centers is one of the largest owners of retail real estate in the United States. It has shopping center properties in most major U.S. real estate markets.
And, as the most densely populated areas are the most badly hit by the virus, it’s understandable why REG stock has struggled to bounce back. Add in the long-term concern that e-commerce further decimates demand for retail space, and I concede this is big risk with this stock.
However, jumping into this REIT could be a great contrarian play. While up from March, shares are trading at prices last seen in the early 2010s. While retail real estate now faces multiple hurdles, these issues are more than priced into the stock.
To be sure, some see its high-quality portfolio and strong balance sheet are other key reasons why it’s a worthwhile value play. Add in the potential for the slow crawl back to the “old normal” to continue, and it’s easy to see this stock bouncing back in tandem with the aforementioned consumer stocks.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor to InvestorPlace, has written single stock analysis since 2016.