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3 Restaurant Stocks Investors Should Own Ahead Of Vaccine Rollout

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3 Restaurant Stocks Investors Should Own Ahead Of Vaccine Rollout

As 2020 comes to an end, there is finally hope 2021 will be a better year from a health and safety perspective. Tens of millions of Americans could receive a vaccine against the novel coronavirus soon, with hundreds of millions expected to follow suit over the coming months.

Many are now cautiously optimistic that a successful vaccine rollout can usher in some sort of return to normal. This would mean that restaurants, one of the hardest-hit sectors during the pandemic, can safely operate indoor and outdoor dining with fewer restrictions.

Investors looking to buy restaurant stocks tied to a potential economic reopening have several options. The following is a list of some of the restaurant stocks highlighted by three pros as benefiting from a very supportive environment over the coming months.

Bloomin' Brands

BMO Capital Markets analyst Andrew Strelzik recently upgraded Outback Steakhouse's parent company Bloomin' Brands Inc (NASDAQ: BLMN) from Market Perform to Outperform in mid-November, with a price target lifted from $17 to $22.

According to the analyst's calculations, the Bloomin' portfolio of brands can generate margin upside even if domestic dine-in unit volume comes in 5% below 2019 levels.

The company has a path to additional upside potential as small independent restaurants continue to shut their doors, leaving hungry customers with fewer restaurant options, the analyst said. 

What makes Bloomin' stock noteworthy is the firm's estimates actually implies the company falls short of management's own targets. Specifically, upside potential for the stock exists if operating margins come in at 6.4% versus management's own 7% internal target, according to BMO. 

McDonald's

Iconic fast-food giant McDonald's Corp (NYSE: MCD) may have been better positioned than rival quick service restaurants during the pandemic.

The company was active in improving its drive-thru and delivery business before the start of 2020.

But heading into 2021, McDonald's remains a restaurant stock to own, Pete Najarian said on CNBC's "Halftime Report" Nov. 16. McDonald's is getting "bigger and bigger and bigger" in the digital universe and this will prove to be a winning strategy, he said. 

Investors should be open to the reality that a full return to "normal" may take years. Until then, consumers may still prioritize digital ordering, which is considered a much safer option.

Starbucks

Starbucks Corporation (NASDAQ: SBUX) has certainly seen traffic fall in the morning, as many repeat customers are still working from home. But what makes the stock a standout ahead of the vaccine rollout is how it remained fresh in everyone's minds.

Most notably, the coffee chain generated such a "degree of urgency" during its annual "Red Cup Day" on Nov. 6, according to data analytics company Placer.ai.

In fact, the chain saw a "massive" boost in foot traffic to the point where it was its third-most trafficked day in recent memory, behind Black Friday 2019 and Dec. 26, 2019.

The coffee chain may have not missed a step in adapting to consumers evolving wants and needs. There is plenty of reason to believe that as millions of people potentially return to their offices, their morning routine of picking up Starbucks will continue as before.

 

Related Articles (MCD + BLMN)

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