Forget Cineplex: Buy This TSX Stock Instead

Cineplex Inc. (TSX:CGX) is set to benefit from Ontario’s reopening, but I have my eye on another TSX stock in mid-July.

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The COVID-19 pandemic did not impact all sectors equally after it came to sweep across North American populations in early 2020. For example, the e-commerce space saw its growth accelerate by several years due to the knock-on effects of the crisis. However, industries that were more reliant on in-person consumer engagement were thrown into chaos. Few were more negatively impacted than the movie theatre and restaurant businesses. Cineplex (TSX:CGX), Canada’s top cinema operator, is set to open its doors for the first time in many months this weekend. However, I’ve got my eye on another TSX stock instead.

How does Cineplex stock look right now?

In early June, I’d discussed three reasons Cineplex stock was worth adding ahead of the summer season. Shares of Cineplex have climbed 68% in 2021 as of close on July 15. In theory, investors have excitedly anticipated the reopening of movie theatres. However, this may be a case of buying the rumour and selling the fact.

The movie theatre industry was facing stiff challenges before the pandemic hit. More and more consumers had migrated to home entertainment services, eschewing the traditional cinema. Meanwhile, movie theatres have become increasingly reliant on blockbusters to provide the lion’s share of their revenue. Disney has grown into a box office titan, fueled by its Marvel and Star Wars properties. There is no guarantee that the box office ritual will kick off after the massive interruption that was the COVID-19 pandemic.

Cineplex hit technically oversold levels in the previous month. Moreover, investors have not been able to count on its previously stellar dividend after it was discontinued in 2020.

Here’s why I’m more interested in this TSX stock

Back in June, I’d also discussed why Canada’s reopening should push investors to snatch up restaurant-focused TSX stocks. Restaurant Brands International (TSX:QSR)(NYSE:QSR) has remained one of my favourite TSX stocks, even in the face of the pandemic. Indeed, fast-food franchises proved resilient, as they were extremely adaptable to restrictions and lockdowns.

Shares of RBI have climbed 5.9% in the year-to-date period. The stock is up only 2.4% from the prior year. In Q1 2021, the company returned to system-wide sales growth for the first time since 2019. It added 148 new restaurants in the quarter, which represented the best-ever growth in Q1. Better yet, the struggling Tim Hortons brand finally gained some traction. It delivered 31% digital sales in the first quarter.

That said, Popeyes and Burger King continued to lead the way as RBI’s top brands. Tim Hortons, Burger King, and Popeyes delivered adjusted EBITDA of $207 million, $217 million, and $56 million, respectively — all up from the previous year. Meanwhile, total adjusted net income hit $257 million compared to $227 million in the first quarter of 2020. Investors can expect to see its second-quarter 2021 results in early August.

Shares of this TSX stock are trading around the middle of its 52-week range. RBI offers a quarterly dividend of $0.53 per share. This represents a 3.2% yield.

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 Ambrose O'Callaghan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends CINEPLEX INC. and Restaurant Brands International Inc.

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