The U.S. economy began to rebound this spring as business reopened and coronavirus vaccines were disseminated. Even in states that had tighter Covid-19 restrictions, many Americans are returning to offices, restaurants, sporting events and recreational pursuits. This mass reopening has created huge opportunities in a number of penny stocks.
Activities are expected to reopen at an accelerating rate. Last month, Bloomberg reported that airlines are seeing a quick rebound in summer travel. Business and international travel are on the rise, and airline companies expect to start turning a profit.
Reopening plays are poised to rally as air travel around the U.S. surges. As infection rates decrease, the U.S. may ease its restrictions on foreign tourism and further boosting reopening stocks.
These penny stocks should benefit the most from these trends:
Penny Stocks: Trivago (TRVG)
Like all online travel agencies, Trivago should benefit tremendously as businesses reopen and travel surges as a result.
In 2019, the company was profitable, generating an EBIT of nearly $38 million. Over the 12 month period that ended in March, Trivago’s operating cash flow was $10 million. In the first quarter of 2021, its operating loss fell to $8.9 million from $215.3 million during the same period last year. However, despite the positives, the company’s book value per share is a rather low 1.86.
Referring to Q1, Trivago stated: “Although the overall business environment remains challenging, we observed a positive trend in volumes throughout the quarter.” The company added, “We have begun to see significant recovery in volumes in certain geographic markets, such as Israel and the United States, where the most progress has been made with respect to COVID-19 vaccination programs. In the United States, Qualified Referrals improved from approximately 30% of same month 2019 levels in January 2021 to approximately 70% in April 2021.”
Ashford Hospitality Trust (AHT)
Trading around the $5 boundary for penny stocks, Ashford Hospitality is a real estate investment trust (REIT) that invests in high-class hotels. It has stakes in several hotel chains, including brands owned by Hilton (NYSE:HLT), Marriott (NASDAQ:MAR) and Hyatt (NYSE:H).
Top-notch hotels should benefit from widespread reopening and the revitalization of business travel. Work trips may bounce back soon — especially if sales representatives who don’t travel start losing deals to those who do travel.
That process is already underway. American Airlines (NASDAQ:AAL) reported that it has recently seen “encouraging signs” in business travel.
Like Trivago, Ashford’s business was profitable before the pandemic. Its 2019 operating income came in at $119.8 million. However, the REIT had a very large debt load of nearly $4 billion at the end of Q1. Those who buy AHT stock probably won’t see a dividend anytime soon, and the REIT poses more risk than most of its peers.
However, given Ashford’s tiny forward price-earnings ratio of 1.7, its trailing price-sales ratio of 0.5 and its positive catalysts, I’m very bullish on this REIT.
Penny Stocks: Express, Inc. (EXPR)
As Americans start going out more and many start returning to offices, they will spend more money on clothes. Additionally, those who enjoy shopping in stores will resume that hobby. As a result, Express, which sells on-trend apparel for men and women, should benefit from people updating their wardrobes.
In conjunction with its Q1 results, Express CEO Tim Baxter said the company’s sales volumes exceeded 2019 levels in March and April. Additionally, the company’s e-commerce transactions soared 40% year-over-year (YOY) and net sales climbed 64% YOY.
Impressively, Express hopes to raise its annual e-commerce revenue to $1 billion by 2024. This could be easier than it seems, as the company cut back on its promotional discounts in Q1 and plans to continue that tactic going forward.
Express has made some appearances on Reddit’s r/WallStreetBets forum and could get a boost from retail investors who focus on social media.
The shares have a tiny price-sales ratio of 0.22.
Good Times Restaurants (GTIM)
Good Times operates and franchises casual and drive-thru hamburger restaurants. The company is well-positioned to benefit as millennials and Gen-Z bring home food from drive-thru restaurants more often.
The trend took hold during the pandemic, but I expect it to remain strong since habits are difficult to break.
Good Times’ casual dining franchise has a unique, memorable name — Bad Daddy’s Burger Bar. The restaurant chain should get a revenue boost as businesses reopen.
The company is already benefiting from those trends. Its sales jumped 11.5% YOY in Q1, same-store sales climbed 22.9% and net income was $1.1 million. Good Times also expects to open two new Bad Daddy’s restaurants this year.
Meanwhile, in the 12 months that ended in March, the company’s bottom line came in at positive $3.7 million. Good Times has a trailing price-earnings ratio of just 13.7 and a trailing price-sales ratio of less than 0.5.
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On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
