Canadian Tire Stock Could Skyrocket in a Return to Normalcy

Canadian Tire (TSX:CTC.A) stock looks like one of the biggest bargains on the TSX Index as the Canadian economy attempts to re-open.

| More on:
Modern skyscrapers in business district

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

If the businesses were to re-open over the coming weeks and months, there’s a high likelihood that many Canadian consumers would opt to continue staying at home, even if the risk of contracting COVID-19 were to be lowered.

Heck, some folks see the retail landscape changing for good after the pandemic is over. For a brick-and-mortar-focused discretionary retailer like Canadian Tire (TSX:CTC.A), such a permanent change in consumer behaviour would be a devastating blow given the company’s extensive physical reach.

Canadian Tire will eventually get its “big edge” back

While Canadian Tire does have an e-commerce platform, it’s the brick-and-mortar presence that gives the company a real edge over the competition. Few of Canadian Tire’s competitors can say that they have a physical store in close proximity to the average Canadian. And once it’s safer to go outside again, Canadian Tire will regain its physical edge sooner rather than later.

Why?

Many Canadian consumers are probably suffering from a bad case of cabin fever and are itching to return to the normal routine, which includes going to restaurants and local retailers. Self-isolation and the coronavirus pandemic have indeed taken a toll on the mental health of many.

Once the risk of getting infected is diminished, many Canadians will be longing for some return to normalcy as the economy looks to cautiously re-open for business, whether that means going to the restaurant or the local Canadian Tire to pick up that discretionary good. I therefore see compelling value to be had in Canadian Tire stock at these unprecedented depths.

Canadian Tire could bounce on a return to semi-normalcy

Just have a look at Canadian Tire stock. Shares have crashed harder and about the same magnitude as during the 2007-08 Financial Crisis. This type of decline makes no sense, especially given the higher possibility that the economy could face a quicker recovery than during the Great Recession thanks to an unprecedented amount of fiscal stimulus.

Based on the stock chart, Canadian Tire stock definitely seems like the next big-box retailer that’s going the way of the Dodo bird because of COVID-19. When you consider the firm’s sufficient liquidity position and a sales recovery that could happen in a partial (or full) re-opening of the economy in summer, the risk/reward trade-off on Canadian Tire stock becomes too good to ignore for Canadian investors seeking to outsized gains.

Foolish takeaway

Canadian Tire isn’t going anywhere. While the company could witness a few ugly quarters, but given the damage already done, I find it hard to believe there’s much more downside in the iconic Canadian company that currently trades at 0.4 times sales.

Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

More on Coronavirus

Business success with growing, rising charts and businessman in background
Coronavirus

1 Growth Stock Every Canadian Investor Should Consider Right Now

This growth stock saw shares pop 10% on June 20, as one analyst stated there is a significant opportunity to…

Read more »

Aircraft wing plane
Coronavirus

Bombardier Stock Merge: What it Means for Investors

Bombardier (TSX:BBD.B) stock went through a reverse stock split on June 13, turning 25 shares into one in one swift…

Read more »

Aircraft wing plane
Coronavirus

Air Canada (TSX:AC) Stock: Ready to Take Off?

While Air Canada is handling what it can control really well, there are many worsening macro headwinds that will likely…

Read more »

rail train
Coronavirus

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Biotech stocks
Coronavirus

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »

grow dividends
Coronavirus

Goodfood Stock Likely to Double in 2022!

Goodfood (TSX:FOOD) stock has had a huge rise and fall in the last few years. But at $1.85 a share,…

Read more »

grow dividends
Coronavirus

Canfor Stock Pops 5% as Sales Climb 15% YOY

Canfor (TSX:CFP) stock remained positive about its future in the global lumber market after profits climb 15% year over year.

Read more »

edit Safety First illustration
Coronavirus

2 Crash-Proof TSX Stocks I’d Buy With $5,000

These two TSX stocks have proven they can handle this economic downturn and likely will continue to be safe far…

Read more »