The recent announcements from Pfizer and Moderna have increased the hope of the vaccine against COVID-19. The vaccine could allow governments worldwide to lift restrictions, thus allowing life and business to return to pre-pandemic ways. So, here are the three beaten-down TSX stocks that could deliver superior returns in the post-pandemic world.
Suncor Energy
Investors’ optimism over life returning to pre-pandemic ways had led oil prices to rise, with West Texas Intermediate crude oil trading above $42 per barrel. The surge in oil prices drove the stock price of an integrated energy titan Suncor Energy (TSX:SU)(NYSE:SU) 32.9% higher for this month. Despite the recent surge, the company is still trading over 53% lower for this year. The weaker demand for crude oil and refined products due to the pandemic-infused lockdown has impacted its financials and stock price.
Meanwhile, Suncor Energy’s third-quarter performance showed significant improvement from the second quarter. Its operating loss came in at $302 million compared to $1.5 billion in the second quarter. Its funds from operations increased from $488 million to $1.17 billion. Further, the company has lowered its operating and capital costs significantly compared to its previous year, which is encouraging.
The company’s management has also stated that all its maintenance activities were complete, and all its assets were operating at full capacity. With the increase in oil prices and higher production, I expect its fourth-quarter financials to be much better. So, I am bullish on Suncor Energy.
Cineplex
The Canadian entertainment company Cineplex (TSX:CGX) is up over 70% for this month amid the vaccine hope. However, the company is still trading 74.4% lower for this year. The higher net losses, rising debt, and the decline in customer footfall amid the pandemic-infused shutdown have dragged its stock price down.
In its recently announced third-quarter results, Cineplex’s top line contracted by over 85% to $61 million, mostly due to the pandemic’s impact. All its 164 theatres and 1,687 screens across Canada are currently open but are operating under limited capacity. Although the company has taken several cost-cutting initiatives, the company reported a net loss per share of $1.91 compared to earnings per share of $0.21 in the previous year’s quarter.
Amid the decline in its stock price, Cineplex’s valuation looks attractive, with its forward enterprise value-to-revenue multiple standing at 2.6. The news on the vaccine has been encouraging. However, how fast the vaccine could reach the masses would be critical. The vaccine could bring back moviegoers to the theatres and help the company operate at full capacity. So, given the progress in vaccine development and discount on its stock price, I expect Cineplex to deliver superior returns in 2021.
Air Canada
Low passenger volumes, higher cash burn, and soaring net losses have impacted Air Canada’s (TSX:AC) stock price. In the second and third quarter, the company’s passenger volumes declined by 96% and 88%, respectively. It also burnt $2.54 billion of cash during the same period.
However, the company’s performance in the third quarter improved sequentially. Its top line rose 43.6%, while operating losses fell around 50%. Amid its cost-cutting initiatives, the company burnt $818 million, or approximately $9 million per day during the third quarter, compared to its earlier announced guidance of $1.35 billion and $1.6 billion. With access to $8.19 billion of unrestricted liquidity, the company’s liquidity position looks healthy.
Meanwhile, the vaccine could prompt governments worldwide to ease travel restrictions, which could boost international travel. So, amid the vaccine hope, Air Canada’s stock is up 32.9% for this month. However, it is still trading over 53% lower for this year, which provides an excellent buying opportunity for long-term investors.
