The ongoing vaccination, economic reopening, and recovery in corporate earnings suggest that now is the time to invest in stocks hit hard by the pandemic. We’ll focus on three such Canadian companies that I believe could deliver stellar returns once their operations return to normalcy. Moreover, these top reopening plays are trading below $30.
Cineplex
The post-pandemic era is likely to significantly boost Cineplex’s (TSX:CGX) financials and, in turn, its share price. Notably, Cineplex’s operations took a massive hit last year, as the pandemic eroded demand and weighed heavily on the financials. While the resurgence of the virus continues to play spoilsport, I believe Cineplex’s challenges could dissipate soon. Notably, its stock appreciated over 20% in one month on vaccine distribution and easing lockdown measures.
I expect the company to deliver solid returns in the medium to long term, as the demand picks up the pace upon the reopening of its entertainment venues and movie theatres. Furthermore, its revenues and margins are likely to benefit significantly once its operations return to normalcy. Moreover, I expect to see a sequential improvement in its top line and operating capacity. The company’s net cash burn could decline in the coming quarters. Notably, Cineplex stock is trading more than 50% lower than its pre-pandemic levels and is an attractive long-term bet.
Air Canada
The reopening of the economy and easing travel restrictions will likely boost Air Canada (TSX:AC) stock significantly. Air Canada stock has recovered some of its value (up more than 65% in one year) on expectations of a revival in travel demand amid the ongoing vaccination. However, like Cineplex, it is still trading at a massive discount from its pre-pandemic levels, making it a solid reopening bet.
While near-term challenges could continue to hurt Air Canada’s financials, I expect the company’s revenues and capacity to improve significantly as the year progresses. The vaccine distribution is likely to drive air travel demand and support Air Canada’s revenues. The company’s losses and cash burn could go down sequentially, as demand for air travel returns to normal. Meanwhile, the momentum in its air cargo business is likely to sustain and support its revenues and margins. Overall, Air Canada offers a solid risk/reward scenario at current levels.
Suncor Energy
Suncor Energy (TSX:SU)(NYSE:SU) is another stock that could benefit from the steady improvement in the economy and revival in demand. Its stock has gained more than 33% this year, reflecting a solid recovery in crude oil prices and improving demand. I expect the uptrend in Suncor stock to sustain in 2021 and beyond, driven by the improving industry trends and Suncor’s integrated assets.
I expect higher production volumes, favourable mix, and increased prices to support Suncor’s revenues and profitability and drive its stock higher. Meanwhile, its integrated assets and lower costs are likely to support its earnings and cash flows. Suncor is also focusing on lowering debt, which is encouraging. Moreover, it plans to enhance shareholders’ value through share repurchases and uninterrupted dividend payments. Suncor stock is trading considerably lower than its pre-pandemic levels and has all the ingredients of a solid recovery play.
