Pandemic-related restrictions have battered many stocks. Even after these restrictions were lifted, other issues like inflation and the cost-of-living crisis have hammered companies once more. Now though, are certain stocks ready for a rebound? Let’s take a closer look.
Calmer skies ahead?
The first stock I think could make a comeback is easyJet (LSE:EZJ). The firm – a short-haul airline business – has seen its shares fall by 45% in the last year. In the past three months, they’re down 32%. At the time of writing, the share price is 380p.
The pandemic led to the grounding of the vast majority of planes due to the closure of international borders.
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Even now, problems such as cabin crew shortages and surging jet fuel prices following the Russian invasion of Ukraine have impacted the company’s recovery. These may continue.
However, the business expects passenger capacity to hit 87% of 2019 levels for the three months to 30 June, even accounting for flight cancellations due to staff issues.
Furthermore, it forecasts that passenger capacity levels for the three months to 30 September will rise to 90% of 2019 levels. With more planes in the sky, and more people able to fly, this should be good news for easyJet’s balance sheet.
Bank of America recently upgraded the stock to ‘buy’, citing the fact that summer bookings were 13% greater when compared with summer 2019. And for the year ended September, between 2020 and 2021, pre-tax losses shrank from nearly £1.3bn to just over £1bn.
Dishing out the popcorn?
Cineworld (LSE:CINE) has also been smashed by the pandemic. It was forced to close all its cinemas and this resulted in the company slumping to a $3bn pre-tax loss in 2020. In 2021, I added the business to my portfolio.
The shares are down 70% in the past year, but they’re up 16.7% in the last week. At the time of writing, they’re trading at 20p.
With the ending of restrictions and an exciting film slate, including the hotly anticipated Top Gun: Maverick, the company narrowed losses significantly to report a pre-tax loss of $708m in 2021.
However, it’s currently fighting a court battle with Canadian rival Cineplex after a botched takeover deal. If Cineworld fails, it could cost it over £700m. This would become an unsecured debt. There’s also the not insignificant matter of a $9bn debt pile.
On the other hand, free cash flow improved to nearly $400m in 2021, which was on track to reach 2018 levels.
Overall, these businesses have had it tough over the past two years. While they’re definitely not out of the woods yet, there are indications that they’re beginning to recover. I’ll therefore add easyJet to my portfolio soon, while topping up my holding in Cineworld to lower my average weighted price.
