Analysts love these reopening stocks.
Economists, analysts and investors expect a sharp rebound in the U.S. economy over the next three quarters. Some of the most beaten-down stocks of 2020 have been top performers so far in 2021 as investors anticipate huge year-over-year growth numbers off of extremely easy comparisons from a year ago. Bank of America recently ran a screen of stocks that saw the biggest year-over-year drops in sales in 2020. While some of these stocks may never recover from the downturn, others are poised for huge recoveries in 2021. Here are eight reopening stocks that Bank of America recommends.
Marriott International (ticker: MAR)
Marriott is one of the largest international hotel owners and is the parent company of brands such as JW Marriott, Ritz-Carlton, Courtyard and Residence Inn. The travel industry was crushed in 2020, and Marriott's revenue dropped 50% from the previous year. However, analyst Shaun Kelley says there were plenty of "green shoots" for Marriott in its first-quarter earnings report. For example, global revenue per available room, or RevPAR, was down just 50% from 2019 levels in April, a significant improvement from -59% in the first quarter. Bank of America has a "buy" rating and a $160 price target for MAR stock.
Hilton Hotels Corp. (HLT)
Hilton Hotels is another one of the world's largest hotel owners and is the parent company of Waldorf Astoria, Hilton Garden Inn, Embassy Suites and other brands. Kelley says Hilton has one of the best management teams in the hotel industry and has substantial earnings upside ahead. He likes the company's asset-light business model and its predictable earnings outlook and believes the company can sustain historically high earnings before interest, taxes depreciation and amortization margins as the travel industry rebounds. Bank of America has a "buy" rating and a $137 price target for HLT stock.
Wynn Resorts (WYNN)
Wynn Resorts is a global casino company that primarily operates in Macao and Las Vegas. Wynn's revenue plummeted 68.3% in 2020, but Kelley projects that revenue will more than double 2020 levels in 2021. He says fundamentals in Macao are improving, and April Las Vegas RevPAR was up 50% from first-quarter levels. Wynn recently announced plans to combine its WynnBET online gambling business with Bill Foley's Austerlitz Acquisition Corp. (AUS), a move which Kelley says will give Wynn access to much-needed funding. Bank of America has a "buy" rating and a $145 price target for WYNN stock.
Pioneer Natural Resources Co. (PXD)
Pioneer Natural Resources is an oil and gas production company that operates primarily in the U.S. Permian Basin. Oil demand crashed in 2020 due to travel restrictions and economic shutdowns, but crude oil prices have roughly doubled in the past year as investors anticipate booming demand this summer travel season. Pioneer's revenue dropped 27.3% last year. However, analyst Doug Leggate says the company's Permian assets lead the sector, and the company's capital efficiency limits risk in the event of another downturn in oil prices. Bank of America has a "buy" rating and a $192 price target for PXD stock.
Principal Financial Group (PFG)
Principal Financial is a global asset manager and U.S. life insurance company. In February, the company announced a strategic review following pressure from activist investor Elliott Investment Management, which is reportedly pushing for Principal to spin-off its underperforming insurance business and focus on asset management. Analyst Joshua Shanker says life insurance pressures appear to be waning much faster than previously anticipated. The company now estimates that it faces only $100 million in pandemic headwinds in 2021, down from a previous estimate of $300 million. Bank of America has a "buy" rating and a $76 price target for PFG stock
Alaska Air Group (ALK)
Alaska Air is the fifth-largest U.S. airline based on revenue passenger miles. The airline industry is another business that was hammered in 2020, but analyst Andrew Didora says there are now opportunities for selective airline investors. Didora urges a cautious approach to airlines given the strong rallies in most airline stocks since November. Rebound expectations are already priced into airline stocks, so Didora says investors should prioritize airlines like Alaska that have more exposure to leisure travel rather than business travel. Bank of America has a "buy" rating and an $80 price target for ALK stock.
Southwest Airlines Co. (LUV)
Southwest Airlines is one of the "big four" U.S. airlines, and its revenue dropped 59.6% last year. Like Alaska, Southwest has relatively high exposure to leisure travel, which Didora says will recover much faster than business travel. Also, Didora says Southwest has a healthy balance sheet that includes a sizable net cash position. Didora projects that airline industry revenues will recover from just 44% of 2019 levels in the first quarter to 82% of 2019 levels by the fourth quarter of 2021. Bank of America has a "buy" rating and a $68 price target for LUV stock.
Expedia Group (EXPE)
It makes sense that analysts who are bullish on airline, casino and hotel stocks are also bullish on the online travel platforms travelers use to book their trips. Expedia's revenue dropped 56.9% in 2020, but analyst Justin Post projects that revenue will rebound by 76.3% in 2021 and another 30.5% in 2022. Post says there's much to like about Expedia as a recovery play, including its 68% exposure to the U.S. market, its cost-cutting measures and its attractive valuation. Bank of America has a "buy" rating and a $210 price target for EXPE stock.
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