While the majority of the TSX-listed stocks recovered the lost ground amid the pandemic-driven selloff, a few continue to reel under pressure. The pandemic has led to a downturn in their businesses, thus restricting the recovery in their stocks.
The existing challenges could remain a drag in the short term. However, reopening of the economy, sequential improvement in demand, and strong fundamentals imply that investors should consider buying these stocks while they are still down.
Let’s focus on a couple of TSX stocks that could rebound strongly and deliver stellar returns in two to three years, as the economic activities gain pace.
First up are the shares of BlackBerry (TSX:BB)(NYSE:BB). Its exposure to the auto market weighed heavily on its stock, which is down about 24% year to date. However, as lockdown measures are eased, and the economic activities are increasing, investors should keep an eye on BlackBerry stock.
Its stock has recovered nearly 61% from its March lows and could continue to rise higher as the auto market is showing signs of recovery. Further, the company’s secured solutions supporting work from anywhere is witnessing solid demand and continues to drive its business.
Investors should note that BlackBerry’s revenues improved both sequentially and year over year in the most recent quarter, which is encouraging. Meanwhile, management said that the signs of recovery in auto production imply a sequential improvement in revenues and a gradual return to a normal rate by early 2021.
BlackBerry’s ability to expand its customer base is likely to support the expansion in its revenues and profitability. Further, strong demand for its security software amid a structural shift towards remote work and a large addressable market should push its stock higher. Its solid recurring software product revenues, improvement in the automotive market, and the reduction of debt point to a stellar recovery in its stock in the coming two to three years.
Shares of Spin Master (TSX:TOY) have jumped by about 197% post hitting its low in March 2020. Despite the sharp recovery, Spin Master stock is still down about 27% year to date and presents a good entry point for investors with a medium- to long-term investment outlook.
Spin Master’s supply-chain issues have mostly been resolved. Meanwhile, the unlocking process post the mandatory lockdowns are lending support to its business and, in turn, its stock. The company’s multi-platform portfolio, including traditional toys, entertainment properties, and digital toys are likely to drive its revenues in the coming years.
Spin Master’s digital offerings, including Toca Boca and Sago Mini, are witnessing significantly higher demand, as the pandemic has led parents to find new ways to entertain and educate their children. Spin Master’s Toca Boca registered over 22 million monthly active users, which is encouraging. Moreover, Sago Mini has over 185,000 subscribers compared to 100,000 in the prior-year period.
Investors should note that Spin Master’s strong digital portfolio, continued orders from its large customers like Walmart and Amazon, and the upcoming key holiday season further strengthen the bull case.
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.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Sneha Nahata has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Spin Master. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon.