1 High-Upside Canadian Reopening Stock Worth a Nibble

Restaurant Brands International (TSX:QSR)(NYSE:QSR) stock looks like a fantastic bargain for value and income investors alike ahead of the reopening.

| More on:
Female friends enjoying their dessert together at a mall

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

It’s been nothing short of an incredible first half of 2021 for investors. Whether the momentum will continue into year’s end will be anybody’s guess. Regardless, investors need to be ready for a rockier climb, as companies grow into their high multiples.

Moving forward, COVID-19 cases are poised to abate further, and firms will be back to posting incredible earnings growth against favourable year-over-year comparables. Many firms likely already have such earnings spikes baked in, while some may not. In this piece, we’ll have a look at one dirt-cheap value stock that had a relatively muted first half but that could be ready to close out 2021 with a bang if all goes well and vaccination efforts prevent a fourth major wave.

Reopening stocks: What’s their next move?

Right now, many reopening plays seem to be running out of steam, and for good reason. The insidious coronavirus continues to mutate, with the “delta” and “delta plus” variants of concern spreading rapidly in various parts of the globe.

Such variants could bring forth a fourth wave, even as vaccination efforts accelerate. While variants pose a serious risk to some of the more aggressive reopening plays (think Air Canada stock), I think that many of the more lockdown-resilient plays are trading at absurdly low multiples. And if all goes well with the summertime reopening, with no lockdowns for the winter, I think many such plays could have considerable upside potential with a manageable magnitude of downside risk.

Yes, Canada’s favourite reopening stock, Air Canada, could finish the year with a steady ascent to much higher levels. Still, lockdowns could easily cause shares to nosedive uncontrollably, making the name less worthy of the investment dollar of the easily rattled.

The market environment remains highly unpredictable

Although there’s more clarity on the ongoing war between variants and vaccines, I think it’s only prudent to acknowledge the profound uncertainties that still lie ahead. It’s not just monetary policy shifts that could shock and awe investors going into year end. The pandemic isn’t over yet. Things could still take a drastic turn for the worst. As such, investors still must be ready to roll with the punches in an environment that could offer less in the way of prospective returns and more in the way of choppiness.

One reopening stock with a great risk/reward scenario, regardless of what ends up happening next, is Restaurant Brands International (TSX:QSR)(NYSE:QSR), a fast-food behemoth behind three of the most enviable brands in the quick-serve restaurant scene in Tim Hortons, Burger King and Popeyes.

Over the past year and a half, Burger King and Tim Hortons have enjoyed limited success. The latter chain was actually a major drag and has been viewed as a major overhang on QSR stock. Amid the pandemic, dining room closures have hit Tim Hortons very hard. With limited drive-thru and delivery success relative to other peers in the quick-serve scene, the iconic Canadian shop has been the reason to take a raincheck on QSR as a whole, despite the industry sensation that is Popeyes or positive developments at Burger King.

Arguably, Tim Hortons has the most room to run once the pandemic ends. Still, nobody knows when the pandemic will end or how many more waves of COVID-19 will happen before the insidious virus is eliminated. That said, I am bullish on Restaurant Brands’s modernization and digital investment initiatives. Such initiatives will pay dividends for many years down the road, and they’ll help QSR fare better should this pandemic drag longer than expected.

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 owns shares of Restaurant Brands International Inc. The Motley Fool recommends Restaurant Brands International Inc.

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 »