Breaking news came out this morning about Pfizer (NYSE: PFE) pushing forward with the production of a vaccine that has yielded 90% positive results for preventing COVID-19. This has put the company on track to apply for emergency-use approval from the FDA later this month, wherein further steps will be decided.
“We’re in a position potentially to be able to offer some hope,” Dr. Bill Gruber, Pfizer’s senior vice-president of clinical development, told The Associated Press. “We’re very encouraged.”
As you may expect, there are certain industries surging massively off the news. While this is being written intraday and only initial trading data is available, it’s looking safe to assume that companies within the industries mentioned are going to be experiencing double-digit increases in their stock prices today.
Continue reading to learn exactly what these industries are…
If COVID is a bull, the airline industry is the china shop. Since the onset of the pandemic and associated travel restrictions, airlines have been in full crisis mode. While consolidation of the industry over the past decade has helped stop any of the big players from going under, it hasn’t saved them from emergency loans and capital raises at decreased valuations.
Many investors purchased air-travel stocks while the pandemic had them at steep discounts, expecting to see a near term rally in share price. However, the expected gains did not follow as planned, as the industry was truly in a more dire situation than initially thought. We made a video covering the sector, outlining why we thought it was necessary to wait for more vaccine progress. Today’s news was a welcome announcement, giving the industry a sign of hope.
It isn’t too late to get into these companies though, as many are still trading 30-40% below their pre-pandemic levels. While the road to recovery will be bumpy as hopeful vaccine news is only the first step, optimism could lead the charge to a sustained stock price gain over the next few months.
In order to value these companies in the near term, we‘re focused on advancements in rapid testing at airports, tourist travel restrictions, and the overall severity in COVID cases that are currently plaguing the airline sector.
2. Cruise Ships
Cruise ships have long earned a reputation for being disease incubators, with many travelers recounting their experience alongside a piping hot bowl of chicken noodle soup. While living in an era with infection at the top of everyone’s minds, cruise ships have naturally taken a big hit.
Pfizer’s vaccine news, however, has wildly corrected the course for these ships, bringing the stock price for the major cruise companies (Royal Caribbean, Carnival, and Norweigan) up 30-50% intraday. Interestingly, even with the huge jump in price within the course of the day, some of these stocks are still worth less than half their pre-pandemic levels, indicating that they have a long road of possibility ahead of them.
Over the past 6 months, news has come out about emergency loans, operating cash financings, and other financial instruments required by cruise ships to wait out the pandemic. Sifting through this financial information is going to become increasingly important for evaluating which of these companies are worthy of retail investments now, versus which are better to wait on.
Even with a potential vaccine on the horizon, it will take quite some time for production volume to reach a level where the entire population can be vaccinated. In the meantime, sanitization and social distancing measures will likely not be adequate for a significant number of passengers to return to ships, putting a continued strain on operations.
3. Hotels & Casinos
Prior to 2020, most white-collar professionals have found themselves in a hotel for a conference, converging with drinks at the casino; however, this year, most white-collar professionals traded in slot machines for slippers as more events moved online.
While hotels and casinos (often owned by resort chains) saw less dramatic drops than the other two industries discussed in this article, their valuations are still down 5-20% from their pre-pandemic levels and, at the time of writing, are surging 13-29% on the day.
As COVID-related doubts are quelled and travel-based leisure activities become viable options once more, hotels and casinos could see increased valuations and further runs, depending on next steps in the vaccine process.
There is no denying that pent-up travel demand exists, but the social nature of hotels will undoubtedly turn away more cautious guests (particularly the elderly and those with young families). However, there are opportunities coming soon such as the imminent Airbnb IPO, which may be an interesting angle for investors looking to capitalize on depressed hospitality valuations as demand for private lodging appears to remain comparatively strong.
While the aforementioned industries are the obvious winners in the market today, this news has wide-reaching implications for a multitude of companies and industries as the entire stock market landscape experiences a tectonic shift.
We’re working on a list of companies that are poised to profit off today’s Pfizer news, as the vaccine process rolls forward.
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