Recent economic data shows that the U.S. economy is recovering at a faster pace than expected from the Covid-19 pandemic. As vaccinations accelerate and government stimulus measures support consumers and businesses, the economy is expected to surge once pent-up demand is unwound, and along with it, an array of new stocks to buy.
In this year’s second half, industries that were hardest hit by the pandemic are expected to come roaring back. Vacation resorts, movie theatres, restaurants and airlines are each forecast to run hot in 2021 and beyond as people get out of the house and spend again on leisure and entertainment.
In this article, we look at seven stocks that will benefit from pent-up demand.
- MGM Resorts (NYSE:MGM)
- Live Nation Entertainment (NYSE:LYV)
- AMC Theatres (NYSE:AMC)
- The Walt Disney Company (NYSE:DIS)
- Carnival (NYSE:CCL)
- Simon Property Group (NYSE:SPG)
- Southwest Airlines (NYSE:LUV)
Stocks to Buy: MGM Resorts (MGM)
Americans love gambling. Consider that more than $4 billion was wagered on the Super Bowl this past February and you get an idea of how big an industry gambling is in the U.S. And, as people again return to the gambling and entertainment meccas of Las Vegas and Atlantic City, it should benefit MGM Resorts, one of the leading casino and resort companies in the world with operations as far away as Macau, China.
MGM used the pandemic as an opportunity to reposition and re-brand itself, moving away from gaming in casinos and vacation resort properties and focusing more on sports betting. That shift should help MGM by lessening its reliance on foot traffic at its casinos and as sports at both the collegiate and professional levels return with a vengeance this year.
MGM stock has been one of the stronger reopening plays this year. Since January, the share price is up a cool 30% at just over $40.
Live Nation Entertainment (LYV)
Live music is a huge business. In 2019, before Covid-19 shut things down, the live music industry generated global revenues (subscription required) of nearly $30 billion. Last year, revenues were a third of that level at just $10 billion worldwide, according to market research firm Statista. This year, live music revenues are expected to be double the 2020 level at $20 billion and are forecast to reach $31 billion by 2024. All of this is great news for Live Nation Entertainment, the Beverly Hills, California-based company that promotes, operates and manages ticket sales for music concerts and other live entertainment events all over the world.
To be sure, Live Nation had a rough go of it in 2020 as its revenue fell 84% from pre-pandemic levels. The company compensated by implementing $950 million of cost reductions. It also remains bullish on its prospects for this year, noting that 83% of customers with tickets to cancelled shows have opted to hold on to their seats until the events are rescheduled. Only 17% of ticket holders asked for their money back.
Investors have responded positively to Live Nation’s cost cutting and outlook, pushing LYV stock up 11% year-to-date at $81.82 a share.
AMC Theatres (AMC)
AMC stock has been knocked around a lot this year, pushed up and down by the Reddit trading crowd that apparently finds it amusing to pump-and-dump shares of America’s largest movie theatre chain. Add in a narrowly averted bankruptcy filing and a recent analyst report that put a price target on AMC shares of $0.01, and it’s clear that it has been a challenging time for the Leawood, Kansas-based company that has been credited with popularizing the modern movie-going experience.
However, despite all the drama, there is reason to be hopeful when it comes to AMC Theatres and the box office. While there have not been many blockbuster movies released in theatres in recent months, the opening of the film “Godzilla vs. Kong” at the start of April gave reason to cheer. The Warner Bros. movie had the best opening weekend for a movie since the Covid-19 pandemic shutdown theatres, raking in $32.2 million in domestic ticket receipts. Worldwide, Godzilla vs. Kong earned $285.4 million during its five-day opening weekend (Wednesday to Sunday).
AMC stock has been whipsawed this year, but has been holding steady around $9.50 a share since the end of March.
The Walt Disney Company (DIS)
The Walt Disney Company has largely been propped up during the pandemic by the growing strength of its streaming service, Disney+. That the company launched its streaming platform less than six months before the Covid-19 pandemic forced the shut down of the company’s theme parks, cruise lines and resorts all over the world seems now like brilliant planning on the part of the Mouse House. Disney+ has, after all, added more than 100 million subscribers since it first launched in the autumn of 2019.
However, Disney+ remains only one part of the company’s business, albeit a growing part. And now that Covid-19 is in retreat around the world, Disney will reopen its theme parks and attractions this spring and summer that were almost entirely closed throughout last year.
There’s also the popular Disney cruise line business to restart and new film and television production that will provide new content to Disney’s popular library, adding to properties such as Star Wars, Marvel, Pixar animation and more. All told, Disney should have a very big year in 2021.
DIS stock has pulled back a bit in recent weeks at $183.15 a share, but it has been taking runs at breaking above $200 a share since mid-February.
Carnival Cruise Lines is ready to come out of dry dock and take to the seas again. This explains why the Miami, Florida-based company, the world’s largest cruise operator, is lobbying the Center for Disease Control to try and get its cruise ships sailing again.
At stake is a share of the $16 billion in revenue that is expected to be generated by the cruise line industry this year. How soon Carnival is able to resume operations to destinations such as the Bahamas and Bermuda remains to be seen. But the pent-up demand should put wind in the sails of the company and CCL stock.
Since the end of January, CCL stock has risen 26% to $27.34 a share. More gains are forecast as the company’s operations and revenues return in earnest later this year. The share price has pulled back from near $30 since the start of April as the company’s immediate prospects remain cloudy. But a bullish case can be made for Carnival as Covid-19 vaccines accelerate and the economy reopens. The median price target on the company’s stock is right around $30 a share, suggesting a small upside from current levels. The high price on the stock is $41 per share.
Simon Property Group (SPG)
The shopping mall isn’t dead. Not yet anyway. While we’ve all increased our online shopping over the past year, people are itching to get out of their houses and go back to their favorite stores. Beyond that though, shopping malls are not just places where people go to shop. They are also where people meet to socialize with friends and families, grab a bite to eat and maybe see a movie. And this all bodes well for Simon Property, the largest shopping mall operator in the United States.
With the economy in full recovery mode and a new round of $1,400 stimulus checks landing in consumers’ bank accounts, retail stores and shopping malls are sure to benefit. The National Retail Federation forecasts that retail sales will grow nearly 10% this year to more than $4.30 trillion as consumer spending rebounds strongly from its pandemic lows.
This optimistic forecast is reflected in SPG stock, which is up 36% year-to-date at $114.17 a share.
Southwest Airlines (LUV)
How will everyone get to their vacation destinations and travel to see friends and family in the coming months when the country reopens? Southwest Airlines, that’s how. The top U.S. airline for leisure travel is guaranteed to benefit from the reopening of the economy and pent-up travel demand. Already, air travel is moving higher with the Transportation Security Administration (TSA) reporting daily screenings of more than 1.5 million passengers, the most since before the pandemic.
Southwest Airlines, which is the largest low-cost airline in the world, carries more domestic passengers than any airline based in the U.S. The carrier also flies to popular sun destinations in the Caribbean and Mexico, and aggressively markets its low fares and travel locations to the public.
LUV stock has been a clear winner this year, with its share price up 32% year-to-date as investors increasingly buy into the reopening story and bet on revenge travel.
On the date of publication, Joel Baglole held a long position in DIS.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.