Three Stocks to Watch as Economy Reopens

With many on Wall Street scratching their heads over the market’s 30% bounce off March’s lows, there are definite signs that a corner may have been turned in the battle against Covid-19. Over this past weekend, several countries and US states made headlines as they began announcing plans to reopen their economies. If the market was excited about this potentially happening over recent weeks, you can bet it will be excited about it actually happening in the near future.

Many stocks have already come close to undoing all of Q1’s damage and some are even trading at fresh all time highs already. However, there are still plenty that are worth keeping a close eye on as their ‘real’ recovery will only begin when the lockdowns end and business is back to normal.

MGM Resorts International (NYSE: MGM)

MGM endured more than an 80% selloff in its stock from January’s levels through the end of last month. This was a jaw dropping fall for the hotel and casino company as their shares went back to 2009 levels and it’s understandable. As non-essential businesses were shut overnight and discretionary travel dried up, no one was going to Las Vegas for a week of partying.

MGM is expecting a 30% drop in Q1 revenue compared to last year with net revenue from China in particular expected to be down more than 60%. On top of that, consolidated Adjusted EBITDAR will be down around 60%. Shares have been able to stage a juicy 150% rally off the lows for those that were brave enough to buy when there was blood on the street but they’re still down more than 50% from January’s levels.

After being locked up for weeks on end, there are surely plenty of people chomping at the bit to get out of the house and party. As restrictions are relaxed and contagion fears abate, this hotel and casino can expect to be operating as normal and its share price should be inclined to follow.

Royal Caribbean Cruises (NYSE: RCL)

Cruise names were one of the first industries to start dropping as the coronavirus spread out of Asia and investors wasted no time in sending the stock of Royal Caribbean down almost 90% in just 9 weeks.

However, buyers have consistently stepped in to pick up shares of the beleaguered stock around the $23 level over recent weeks and shares are up almost 100% off the lows. With the worst-case scenario pretty much already baked into the price, any kind of earlier-than-expected reopening of the economy or relaxing of restrictions will alleviate pressure on the company.

While cruise ship companies were omitted from Trump’s stimulus package, many of them, including Royal Caribbean, announced fresh borrowing last week to help them weather the storm. All sailings have been suspended through June 11 and bargain-hunters will be watching closely to see if that date holds and what the stock might do if it does.

Nordstrom (NYSE: JWN)

Retail stores like Nordstrom have had to rely on online sales for much of the past two months and some have had to throw in the towel already. Nordstrom has laid off many front line employees, furloughed executives and paused remuneration to board members in an attempt to batten down the hatches.

Shares had fallen 70% in little more than a month through the end of March and despite a decent pop off the lows, are still down 50% from February’s levels. It will be interesting to see their Q1 numbers and to understand just how big a shift has taken place in revenue streams. Bed, Bath & Beyond’s (NASDAQ: BBBY) e-commerce numbers for April were up 85% month on month according to a company announcement on Monday so there’s definitely hope for other retail investors.

William Blair’s analysts said in a March note to investors that they were sufficiently impressed with Nordstrom’s cash position and liquidity to ride out the turbulence which is promising for those interested in getting involved now. The company has also just floated $600 million of fresh debt earlier this month too. Shares had been rallying well in the final quarter of Q4 and as stores reopen and brick and mortar sales return, investors will be hoping to get back some of that momentum.