It is hard to believe that it has been a full year since the massive shutdown of the country due to the COVID-19 pandemic. What a difference a year makes, with three vaccines being distributed and administered, new cases and deaths dropping rapidly and a massive round of stimulus money already hitting some bank accounts. The hope of many is that we are heading toward full herd immunity and a return to life as we knew it entirely by the fall.
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The equity strategy team at Jefferies is very positive on the economy for this year, as demand is expected to surge, and they see gross domestic product for 2021 coming in at the highest levels in years. They noted this when discussing the very positive outlook going forward:

We believe that a surge in personal income, coincident with a reopening economy will unleash substantial pent-up demand in service sector consumption. Chief Economist Aneta Markowska forecasts GDP growth of 6.9% in 2021, with much of that first-half-loaded and service-oriented. Specifically, she sees second quarter GDP north of 8%, supported by the next round of stimulus, more vaccines, better weather, and pent-up demand, which should combine to benefit the service sector considerably.

Jefferies is focused on 27 companies the firm feels will see a huge benefit from the pent-up demand. We screened the list for companies rated Buy at the firm that make sense for growth investors looking to play the resurgence. These five look especially good now. It is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Airbnb

Increasingly, travelers domestically and overseas have turned to this company to find comfortable lodging at all price points. Airbnb Inc. (NASDAQ: ABNB) operates a platform for stays and experiences to guests worldwide. The company’s marketplace model connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms and luxury villas. Formerly known as Air Bed & Breakfast, the company changed its name in November 2010.

The stock was a parabolic winner out of the gate last month, and while it backed off some, it still offers investors an opportunity to scale in funds and start acquiring shares to build a position. Jefferies is very positive and noted in the research report it expects Airbnb bookings and revenue to return to pre-pandemic levels by the first half of 2022, showcasing the resilience of the home-sharing market.

Jefferies has set a $210 price target for the shares and an upside target of $250. That compares with a lower $185.84 Wall Street consensus. Airbnb stock closed on Monday at $209.99 a share.

Almost every investor likely has dined at one of the company restaurants over the years. Brinker International Inc. (NYSE: EAT) owns, develops, operates and franchises casual dining restaurants in the United States and internationally. As of June 24, 2020, it owned, operated, or franchised 1,663 restaurants, including 1,610 restaurants under the Chili’s Grill & Bar name and 53 restaurants under the Maggiano’s Little Italy banner.
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Like most companies in the restaurant arena, 2020 has been rough for Brinker, but the Jefferies analysts are very positive on the prospects for 2021:

We believe investors are willing to entertain modestly more multiple expansion should the upside framework above come to fruition, and rates remain low. They view the Full-Service Segment as best positioned to benefit from the recovery (not to mention capacity reductions, margin improvements, pricing power, and other tailwinds), and model same-store-sales, EBITDA, and EPS higher than the Street on average.

The Jefferies price objective is $67, and its upside target is $87. The consensus figure is $68.89, but Brinker International stock closed at $77.77 on Monday.

Lowe’s

This home improvement retailer has a low 6% of foreign sales and remains a top pick at Jefferies. Lowe’s Companies Inc. (NYSE: LOW) is a leading home improvement retailer with more than 2,000 stores in North America. The company has tempered its new store opening plans and is focusing investments on technology and e-commerce capabilities, in addition to improving its retail store productivity.

Lowes offers products for maintenance, repair, remodeling and home decorating. It provides home improvement products under the categories of kitchens and appliances, lumber and building materials, tools and hardware, fashion fixtures, rough plumbing and electrical, lawn and garden, seasonal living, paint, home fashions, storage and cleaning, flooring, millwork, and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.

After a massive year in 2020 as people stayed home and did innumerable do-it-yourself projects, the Jefferies team remains positive:

Analyst Jonathan Matuszewski base case assumptions for Lowe’s call for comparable sales growth down slightly after a remarkable ~25% in 2020. With comparisons positive, some margin benefits, and a slightly higher multiple, he thinks his bull case would be more likely than his base case.

Investors in Lowe’s Companies stock receive a 1.40% dividend. The $200 Jefferies price target and $236 upside target compare with the consensus target of $196.38. Shares were last seen trading on Monday at $174.20 apiece.

With people getting back out and holding backyard barbeques, as well as going out to bars and restaurants, and a host of other reasons, beer is always in demand. Molson Coors Brewing Co. (NYSE: TAP) is one of the world’s largest brewers (more than a 3% global share) with core brands Coors Light, Miller Lite, Carling, Molson Canadian and Staropramen.
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Molson and Coors merged in February 2005 and added StarBev in 2012, and it serves markets including the United States, Canada, Eastern Europe and the United Kingdom and Ireland, with exposure to other markets through its Molson Coors International division. It acquired the remainder (58%) of the U.S. joint venture (MillerCoors) in mid-October 2016.

Last month the company provided a fiscal 2021 financial outlook that implies a significant step up in marketing spending, which should help support sales growth, with spring right around the corner.

Jefferies has its price target set at $53 but with an upside target of $69. The consensus target on Molson Coors Brewing stock is just $48.36, and Monday’s last trade hit the tape at $47.64.

Southwest Airlines

This company continues to expand routes, remains a low-cost leader and is one of the top airline picks across Wall Street. Southwest Airlines Inc. (NYSE: LUV) is the fourth-largest U.S. airline by revenue, but it ranks first in the number of originating passengers boarded. The company operates a customer-friendly, low-cost, point-to-point model without fees and offers flights throughout the continental United States. Its six largest operations are in Dallas, Chicago, Las Vegas, Baltimore, Phoenix and Houston.

Southwest Airlines said recently that passenger bookings have been picking up as travelers seek warm destinations, with operating revenue in March and April expected to improve better than previous expectations, even as the pandemic still weighs. The Dallas-based carrier’s passenger demand and operating revenue were in line with its expectations last month, but the current month and next are running ahead of predictions “primarily due to an increase in passenger traffic and fare expectations.”

Jefferies said this:

If pent-up demand is a significant driver through the second half of the year, Southwest Airlines is best positioned to benefit given domestic travel restrictions are likely to be lifted before full international restrictions. The analyst believes that given the company’s net cash position, as well as the excess aircraft in its fleet with the recertification of the MAX, the airline can continue to take share from network carriers. In addition, Southwest is poised to benefit from its core domestic leisure customer being the first to recover fully

The company has suspended the dividend until September of 2021. Jefferies has a $56 price objective and an $80 upside target. The posted consensus target is $58.28. The closing price on Monday for Southwest Airlines stock was $62.10 a share.

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The past year has been hard on everybody, but it appears that we are finally turning the corner on one of the most incredible health events in this country since the Spanish Flu pandemic after World War I. With life starting to return to normal, all these outstanding companies may be big winners going forward.

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