As optimism on Wall Street grows about potential FDA approval for a coronavirus vaccine, here are six stocks that could make outsized gains and rebound on the news, according to experts from Stifel.
Stifel analysts recently highlighted a handful of stocks in the hospitality and leisure industry that would be direct beneficiaries from a vaccine announcement and a relaxation in global travel restrictions.
Stifel’s picks include cruise stocks Carnival, Lindblad Expeditions and OneSpaWorld, casino operators Caesars Entertainment and Las Vegas Sands, as well as theme park and entertainment company, SeaWorld.
Each of these stocks has suffered heavy losses in 2020 as travel revenues plunge amid widespread lockdowns and travel bans during the pandemic: Carnival is down over 65% this year, OneSpaWorld by more than 55% and SeaWorld by nearly 40%.
During a meeting of the Miami-Dade County Tourism and the Ports Committee earlier this week, cruise line CEOs vocally called for a return to service: “Enough is enough. It’s been more than six months. We as an industry, we as a society, have learned a lot on how to live alongside Covid,” said Norwegian Cruise Line chief Frank Del Rio.
Although Stifel’s analysts say most stocks would benefit from a positive vaccine announcement, they believe that “any type of stock related to the cruise industry could outperform others.”
The firm especially likes OneSpaWorld and Lindblad Expeditions, each with a market value of less than $1 billion: “While the logical rationale would be to play the recovery through the ‘bigger’ cruise operators, if possible, we see a better opportunity through two small-cap ideas,” the analysts noted.
What To Watch For
Stifel says Lindblad has an advantage with its relatively small cruise ships, which “greatly reduce the amount of people that need to be accounted for to create a safe environment for passengers onboard.” It also sees OneSpaWorld, which operates health and wellness centers on cruise ships and resorts, as a safe bet: The company only needs to capture around 11% of the passengers onboard to make their business functional, the analysts point out. OneSpaWorld is “more isolated versus the cruise operators themselves,” Stifel says, and it could also be a “major beneficiary” of onboard credits used to lure customers back onto cruise ships.
The U.S. government has so far funded three potential coronavirus vaccines which are now in late-stage Phase 3 trials. The companies behind them include Moderna, AstraZeneca (partnered with the University of Oxford), and Pfizer and BioNTech.
Big Number: 6.4 Million
That’s how many coronavirus cases have been confirmed in the United States so far, with over 191,000 deaths, according to the latest data from Johns Hopkins University.
“Vaccines for Covid-19 are being developed at a rapid pace… despite substantial uncertainty, the most likely outcome is that at least one vaccine will gain FDA approval this fall,” Goldman Sachs analysts predicted last month. The firm said the quicker arrival of a vaccine—with widespread availability by early 2021—would boost prospects for an economic recovery: Consumer spending would accelerate in the first half of next year as Americans “resume activities that would previously have exposed them to Covid-19 risk.”
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