Reopening plays have largely been out of the spotlight as GameStop (GME) and some other heavily-shorted names favored by a certain Reddit message board were squeezed higher.
But the risk/reward for at least some of these firms looks intriguing right now, for a few different reasons.
First, COVID stats have begun trending in the right direction, with cases and hospitalizations now well below their January highs on a rolling 7-day basis. And though some of this appears to be the result of COVID infections dropping after a holiday season spike, it increasingly looks as if the rollout of vaccines to the elderly and other at-risk groups is also playing a role.
Our daily update is published. States reported 1.7M tests, 118k cases, 95,013 people currently hospitalized with COVID-19, and 2,055 deaths. pic.twitter.com/xnetqNQc72
— The COVID Tracking Project (@COVID19Tracking) February 1, 2021
Data from Israel -- the country that has made the most progress to date in terms of vaccinating a large percentage of its elderly population -- is also encouraging. Not only have COVID cases begun falling meaningfully among older Israelis, but only a miniscule percentage of the vaccinated (38 out of nearly 750,000 vaccinated people over the age of 60) have been hospitalized with any kind of serious disease after receiving the vaccine.
In addition to saving many lives, the rollout of vaccines to at-risk groups could give the economy a boost well before the vaccination rate for the population overall crosses 50%, given that consumer spending has been much weaker among older Americans than younger ones. JPMorgan's consumer spending tracker (it relies on Chase credit and debit card data) currently shows card spending up 2.3% annually among Millennials and Gen Z, but down 11.6% among Baby Boomers.
And looking farther out, the work that's being done right now to create vaccine credentials (both smartphone and paper-based) could pave the way for broader reopenings.
Vaccine credentials/passports are understandably a hot-button topic -- if, for example, they were required to board a train or a plane at a time when much of the populace still hadn't been vaccinated, there would naturally be a backlash. But on the other hand, credentials could play a pivotal role by this summer in allowing consumers to partake in recreational activities and events that have been shut down or severely restricted due to COVID, such as cruises, sporting events and concerts.
Finally, the arrival of a fresh round of stimulus -- the debate increasingly seems to be one about how much new stimulus will arrive, rather than whether or not it will -- could provide an extra boost to consumer spending in the coming months. As it is, consumer savings rates have been elevated since March, and there appears to be a lot of pent-up demand for things such as travel, dining and live events.
I previously highlighted Groupon (GRPN) and Yelp (YELP) as tech names that look like interesting reopening plays. For each company, I think the bull case revolves not just around how business should improve considerably if and when vaccines help drive a major surge in travel, dining and hospitality spend, but also their cost-cutting efforts over the last 12 months and how local businesses will likely be eager to use digital platforms to promote themselves to both potential new customers and to pre-COVID customers who have stopped visiting since last March.
Some other names might also be worth a look. Eventbrite (EB) is more expensive than Groupon or Yelp, but it is a clear play on the resumption of live events, and one with a fairly differentiated platform. And though weak business travel demand could remain a headwind for Lyft (LYFT) for a while, the company would naturally get a large boost from higher consumer travel and hospitality spend. Like Groupon and Yelp, Lyft's cost structure has meaningfully improved over the last 12 months. And unlike archrival Uber (UBER) , Lyft doesn't have a food-delivery unit that will likely see demand drop as reopenings happen.
Also, though they don't fall into my area of expertise, there are bound to be many publicly-traded non-tech companies that stand to get a large boost from reopenings. Profit growth could be especially strong within industries where supply is currently well below where it stood in Feb. 2020 (for example, restaurants), thus making capacity shortages and price hikes a strong possibility as demand picks up.
