1 Top Canadian Pandemic Reopening Play to Buy Right Now

Here’s why aggressive investors looking for a top pandemic reopening play may want to consider Roots stock right now.

| More on:
stock analysis

Image source: Getty Images

Investors looking for a top pandemic reopening play certainly have a number of fantastic options to choose from. The economic growth that may come in the months to come could be impressive.

For retailers such as Roots (TSX:ROOT), this growth could translate into impressive near-term performance. Accordingly, investors have a reason to consider this micro-cap player in the North American retail space as a highly leveraged play on this economic recovery.

Here’s why I think now is the time to be bullish on Roots.

Analysts generally positive but cautious

Indeed, the pervasive view on Roots is one of cautious optimism, at least among analysts. I tend to share this view.

Following Roots’s in-line Q2 financial results, ROOT stock got a mixed review from analysts. The consensus was that sales growth through the second half of this year is likely to remain robust. That’s great and in line with what many optimists expect.

However, warnings of supply chains disruptions represent an ongoing risk. While Roots’s management team has noted that all locations have reopened except for one, material margin pressures tied to rising labour costs and rent abatements subsiding are key focal points for investors and analysts in the quarters to come.

I think Roots has the ability to more than offset these costs with rising sales numbers. However, these factors are important to consider.

Thus, the ability of Roots to outperform in the quarters to come really depends on how bullish investors are with respect to this economic recovery. Should consumers show up in force to load up on this iconic Canadian brand before Christmas, these next two quarters could be among the best in terms of growth for Roots in some time.

However, should consumers look to other brands or slow their spending for any reason, Roots could be in for a couple rough quarters.

It appears consensus remains slightly tilted to the positive end of the spectrum right now. That’s where I’m at. However, these two upcoming quarters will be important ones for investors in Roots to watch.

Bottom line

I think there’s a tremendous amount of room for Roots stock to run in a perfect scenario. This is about as highly leveraged a retail stock as investors can get. Those bullish on frenzied retail investor interest in retail stocks may want to consider Roots at this level.

That said, I think this stock is reserved for investors with aggressive risk-tolerance levels. That’s because there’s elevated risk with this stock. Margin pressures and the potential for supply chain disruptions are real.

Accordingly, this is a high-risk, high-reward play that investors looking for a big win may want to consider.

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 Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

edit Sale sign, value, discount
Stocks for Beginners

These 3 Growth Stocks Are on Sale and Set to Surge

Some growth stocks are on sale right now that offer massive long-term potential for investors. Here's a trio to consider…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Why Canopy Growth Stock Could Double in 2024

Canopy Growth (TSX:WEED) stock saw its share more than double in the last two weeks. So, can it do it…

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

stock analysis
Investing

“GARP” Investing: 3 Can’t-Miss Stocks to Buy Now

goeasy (TSX:GSY) and other low-cost growth stocks could make your portfolio a market beater over the long run!

Read more »