It seems like things are moving faster than ever in financial markets. After equity markets made a huge move up last week, we received even more bullish news that sent stocks soaring to reach new all-time highs during Monday’s trading session. Pfizer (NYSE:PFE) announced that early data from its COVID-19 vaccine trials indicated it is over 90% effective at preventing infection. This announcement has significant implications for financial markets as a whole as well as for individual stocks.
While it remains to be seen how quickly the vaccine is approved by regulators in the United States, we know that the market is a forward-looking mechanism. Several stocks in industries that have been lagging due to the pandemic are already making big moves up. Below, we’ve put together a breakdown of 3 stocks to buy that can benefit from the vaccine news.
Bank of America (NYSE:BAC)
The financial sector has been considerably underperforming in the market this year mostly due to economic uncertainty related to the pandemic. Stocks like Bank of America are down over 20% year-to-date and have tested long-term investors’ patience regularly. However, thanks to the latest vaccine news, the financial sector is showing signs of a rebound. This is likely due to a change in perception about what the economy will be like going forward.
A vaccine would likely mean that the economy will rebound, which is great news for all of the major banks. Declining unemployment and a better overall economy mean fewer loan defaults for companies like Bank of America. There’s also the fact that interest rates have been at historic lows during the pandemic. This has seriously hurt the earnings of companies like Bank of America, but interest rates could be going back up as the vaccine makes its way to the public. If you are interested in a strong bank stock that has room to run for the rest of the year and beyond, look no further than Bank of America. The stock currently offers a 2.59% dividend yield and trades at a very reasonable valuation.
TripAdvisor (NASDAQ:TRIP)
While we are still a long way off from travel volumes reaching the levels they were at before the pandemic, the vaccine news is certainly a huge positive for companies like TripAdvisor. It’s an online travel company that owns and operates a portfolio of travel brands. The stock has taken a beating this year and is down over 18% year-to-date, which means that investors who are interested in adding travel companies at low prices might find TripAdvisor appealing.
TripAdvisor’s earnings have taken a sharp downturn as COVID-19 disrupted the global travel and tourism industry. In Q3, the company reported a revenue decline of 65% year-over-year. However, there are encouraging signs that the travel industry and traffic on TripAdvisor’s website are picking up. During Q3, TripAdvisor saw monthly unique users on its website increase by an average of 71% year-over-year. The company has $446 million of cash and cash equivalents on its balance sheet which will help to keep it stable until the full recovery in the travel industry occurs. There’s a good chance that the industry will see a massive influx of travelers thanks to pent-up demand when a vaccine does officially become available. That means a stock like TripAdvisor can see earnings rebound sharply as early as 2021.
Starbucks (NASDAQ:SBUX)
Another company that could benefit greatly from the vaccine news is the retail coffee giant Starbucks. The stock has been holding up surprisingly well throughout the pandemic even though many of its 20,800 retail stores were closed for extended periods of the year. The bull thesis is fairly straightforward for Starbucks, as foot traffic should rebound sharply in the company’s stores as the vaccine is distributed to the public.
Starbucks is also a buy thanks to its significant financial strength and its focus on expanding into international markets like China. The company could see a sharp rebound in revenue growth in 2021 and sales exceeded analyst expectations for the fiscal year ended Sep 27th. Management anticipates comparable-store sales will be between 18%-23% during FY 2021 while the company also plans to launch over 1,000 new stores next year. Starbucks stock also offers a 1.88% dividend yield and has a 3-year dividend growth rate of 20.57%, making it an attractive option for dividend investors.
Final Thoughts
Each one of these stocks has something different to offer investors and could see a lot of upside in the coming months as a vaccine officially becomes available to the public. However, there are still risks related to each one of their businesses, as we are not out of the woods yet in terms of the pandemic. Since these stocks are up considerably following the news, investors that are interested in adding shares should wait for a pullback or consolidation before buying.
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