Are Reopening Stocks Still a Thing in 2023?

With some industries still recovering from the impacts of the pandemic, here are two top reopening stocks to buy while they’re still cheap.

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When the pandemic hit the global economy a little under three years ago, initially, there was a tonne of panic. However, many companies quickly shifted their operations to cope with the restrictions caused by the pandemic. Therefore, within weeks of initial lockdowns, we started to see the economy reopen, and many stocks soon recovered most of their initial losses.

For the better part of 2020 and even 2021, investors focused on managing the uncertainty caused by the pandemic and looking for the best reopening stocks to buy while they were ultra cheap.

And while the pandemic is now mostly well in the rearview, and the majority of businesses across North America have now recovered, there is a handful of reopening stocks that continue to trade cheaply, offering savvy investors an appealing opportunity.

If you’ve got cash to invest and are looking for some of the best deals on the market, here are two of the top reopening stocks in Canada to consider buying today.

Air Canada is one of the top reopening stocks trading undervalued

Ever since the pandemic hit, one of the most heavily impacted industries was the airlines like Air Canada (TSX:AC).

Although most businesses began to see their operation recover in late 2020 or even in 2021, Air Canada and the rest of the airlines had to wait until mid-2022 to see a significant increase in their operations.

To this date, Air Canada still hasn’t reported a quarter where sales have met or exceeded the level they were at in 2019 before the pandemic. However, it’s getting close. In the third quarter of 2022 (the most recent quarter that we have the numbers for), Air Canada’s total revenue reached 96% of where it was in 2019.

Meanwhile, in the first and second quarters of 2022, Air Canada’s total revenue was just 58% and 84% of 2019 sales, respectively. This just goes to show how quickly Air Canada, and the rest of the airlines have been recovering in recent months.

Fourth-quarter numbers for Air Canada are expected this month, and analysts are expecting Air Canada to report total sales of just over $4.5 billion, and, more importantly, roughly 2% higher than the fourth quarter of 2019.

Furthermore, the fourth quarter of 2022 is also expected to be the third quarter in a row that Air Canada reports positive earnings before interest, taxes, depreciation, and amortization (EBITDA), showing that it’s not just recovering sales. It’s well on its way to being profitable again.

With Air Canada stock now trading at a forward enterprise value (EV) to EBITDA ratio of just 6.1 times, and with its share price still trading more than 50% below where it was at the start of the pandemic, Air Canada is one of the few reopening stocks that still offers investors significant value.

Cineplex stock offers a tonne of potential in 2023

Another high-potential stock that long-term investors can consider buying undervalued in this environment is Cineplex (TSX:CGX), the well-diversified entertainment and media company.

Cineplex is a business that was impacted similarly to Air Canada. Restrictions on indoor capacity meant that not only were its movie theatres impacted, but even Cineplex’s ultra-popular entertainment venues were heavily affected, causing sales to plummet through the pandemic.

And although the company has begun to recover through 2022 as restrictions were eased, the film industry had yet to catch up, leaving attendance numbers for its theatres much lower than initially expected by investors and analysts.

The good news for Cineplex is that both its entertainment venues and its subsidiary, Player One Amusement Group, earned record December revenues. Furthermore, there are several major blockbusters due to be released in theatres this year, giving Cineplex a significant opportunity to recover completely.

For the full year 2022, analysts estimate Cineplex earned $1.26 billion in sales, up 92% from 2021, but still only 75% of its sales from before the pandemic. In 2023, though, analysts expect Cineplex’s sales will increase another 24% year over year. In addition, Cineplex is expected to earn positive earnings per share in 2023 for the first time since the pandemic.

Therefore, while Cineplex stock continues to trade below $9 a share, it’s certainly one of the top reopening stocks you can buy today.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Cineplex. The Motley Fool has a disclosure policy.

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