One story that perpetually will be linked to the start of the roaring 2020s will be the COVID-19 pandemic. While the response to the pandemic will be argued over for years, the reality is that for some companies, especially those that benefited from the work-from-home edicts, the virus was a windfall. However, for others it was a nightmare and the search for a vaccine is critical to the resumption of normal business operations.
We have screened our 24/7 Wall St. research database looking for companies that have been hurt by the pandemic but could be big winners if a successful and safe vaccine is brought to the public sometime soon. While the president has said millions of doses could be available by the end of the year or sooner, it is likely that it will be 2021 before it is available to the entire population.
While these five companies are rated Buy at some of the top firms on Wall Street, it’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This should come as no surprise as the industry has ground to a halt with the COVID-19 pandemic. Carnival Corp. (NYSE: CCL) operates as a leisure travel and cruise company in North America, Europe, Australia and Asia. It offers cruises under the Carnival Cruise Line, Princess Cruises, Holland America Line and Seabourn brands in North America, as well as the Costa, AIDA, P&O Cruises (UK), Cunard and P&O Cruises (Australia) brands in Europe, Australia and Asia.
The company operates 99 cruise ships. It also owns Holland America Princess Alaska Tours, a tour company in Alaska and the Canadian Yukon, which owns and operates 11 hotels or lodges, approximately 300 motor coaches and 20 glass-domed rail cars. In addition, the company is involved in the leasing of cruise ships. It sells its cruises primarily through travel agents and tour operators.
Though the Centers for Disease Control and Prevention extended its no-sail order through September 30, some across Wall Street feel that the agency may be ready to lift the order, though it could come with severe restrictions. However, a vaccine would change everything for the cruise line industry.
Barclays recently upgraded the shares to Overweight with a huge $31 price target. The Wall Street consensus target for Carnival stock is $16.65. It closed at $15.31 a share on Monday. Note that it was trading at $50 back in January, before the pandemic.
With phase two opening procedures in place in some areas, the restaurant industry is close to leaving the horror of being shut down except for carryout and delivery. Darden Restaurants Inc. (NYSE: DRI) owns and operates full-service restaurants in the United States and Canada.
As of November 24, 2019, Darden owned and operated approximately 1,799 restaurants, which included 867 under the Olive Garden, 518 under the LongHorn Steakhouse, 166 under the Cheddar’s Scratch Kitchen, 79 under the Yard House, 59 under The Capital Grille, 45 under the Seasons 52, 42 under the Bahama Breeze and 23 under the Eddie V’s Prime Seafood brands.
The company reinforced its balance sheet by completing a $460 million equity raise earlier this year to strengthen its balance sheet. This highlights Darden’s growing cost of capital advantage to peers, given years of a more conservatively run balance sheet. Despite the 6% dilution, Wall Street thinks Darden’s war chest will help it muscle out peers post-pandemic.
The company has suspended its dividend for now. BofA Securities has a $115 price target, and the consensus target is $107.27. The last Darden Restaurants stock trade on Monday hit the tape at $100.58, up 3.5% on the day.
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Without a doubt, travel and lodging returning to normal levels will be big for this lodging giant. Marriott International Inc. (NYSE: MAR) is a global lodging company with over 6,200 properties and 1.2 million rooms in its system. The company has 30 brands in the limited-service (including Courtyard, Residence Inn, TownePlace Suites, Fairfield Inn, SpringHill Suites) and full-service (Marriott, Ritz-Carlton, Renaissance, Bulgari, W Hotels, St. Regis) segments.
The company has continued to integrate the Starwood acquisition of 2015 and derives benefit from its increased scale and brand portfolio of 1.4 million rooms, compared with approximately a million for its competitors.
Shareholders receive a 1.03% dividend. The BofA Securities target price is $110, while the consensus target is $101.65. Marriott International stock closed at $96.01 on Tuesday.
This company continues to expand routes, remains a low-cost leader and is one of the top airline picks across Wall Street. Southwest Airlines Inc. (NYSE: LUV) operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. It was one of the airlines with the fewest delays last year.
While many of the company’s routes have been changed due to the pandemic, at the beginning of the year Southwest Airlines operated a total of 747 Boeing 737 aircraft. It served 101 destinations in 40 states, the District of Columbia and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands and Turks and Caicos. A vaccine should allow the company to return to all these destinations.
The company recently had a massive stock sale to raise cash and improve the balance sheet. The analysts noted this:
Southwest Airlines completed a $3.9 billion capital raise which brings total liquidity to $14.8 billion after all the government payroll support funds. At a cash burn of $34 million per day, the company has enough liquidity to get through the next 435 days (versus 320 days for Delta / 225 days for United). Even with a slow recovery, we expect Southwest to end 2020 with $10 billion in cash and $1.5 billion in net debt.
The company has suspended the dividend until September of 2021. The $44 BofA Securities price objective compares to the $43.80 consensus target. Southwest Airlines stock closed at $38.24 after a 3% gain on Monday.
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This top company is a prime destination for travelers looking to enjoy a visit to Las Vegas. Wynn Resorts Ltd. (NASDAQ: WYNN) operates Wynn Macau and Encore at Wynn Macau resort located in the People’s Republic of China.
The Macau resorts feature approximately 284,000 square feet of casino space, which offers 24-hour gaming and a range of games, with 458 table games and 708 slot machines, private gaming salons, sky casinos and a poker room. Its two luxury hotel towers have a total of 1,008 guest rooms and suites, as well as casual and fine dining in eight restaurants, about 57,000 square feet of retail shopping in stores and boutiques, around 31,000 square feet of space for lounges and meeting facilities, and the Rotunda show. Recreation and leisure facilities include two health clubs, spas, a salon and a pool.
In Las Vegas, the company also owns and operates the Wynn Las Vegas and Encore at Wynn Las Vegas resorts, with a total of 4,748 hotel rooms, suites, and villas; 232 table games; 1,866 slot machines; a race and sportsbook and poker room in approximately 186,000 square feet of casino gaming space, including a sky casino and private gaming salons.
BofA Securities has set a $95 price target on Wynn Resorts stock. The consensus target is $95.94, and shares were last seen trading at $73.62 apiece.
A safe and effective COVID-19 vaccine would be just the ticket for industries that have suffered during the closures and lockdowns. While there is a degree of concern over a “second wave” of the virus, that would be alleviated in a big way with the introduction of the vaccine.