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These Two Reopening Stocks Are Set to Boom This Summer: Should You Buy Shares? | The Motley Fool

In 2021, it seemed like a lot of people were fooled by the summer reopening narrative. you can see it on the graph of u.s. Global Jets ETF (Jets 0.95%), which owns the largest airline shares in the United States. the stock chart peaked in the early spring of last year when everyone was hyped about covid-19 vaccines and a return to normalcy. But with the rise of the delta and omicron variants, reopening has been delayed for many people across the country, and the jet ETF has plunged 17% in the last 12 months.

However, just because 2021 was a bust for reopening stock doesn’t mean 2022 won’t see a resurgence of in-person travel and events. here are two reopening actions that will increase if the actual reopening happens this summer. let’s see if now might be a good time to pick up some stocks.

Reading: Reopen stocks

1. revolver group: online fashion retailer

First, we have revolve group (rvlv -4.28%), an online fashion retailer. you might be thinking, wouldn’t an online retailer have benefited from the pandemic? That’s true for most e-commerce businesses, but Revolve Group’s niche is selling going out clothes to younger women. With many in-person events like parties, weddings, and concerts canceled in 2020 and 2021, the company saw a huge drop in demand because no one felt the need to buy costumes when they stayed inside all day.

This headwind is now reversing. in the fourth quarter of 2021, apparel revenue (revolve’s core product) grew 140% year over year. I think this is a great sign that there is pent-up demand from Revolve’s top customers to buy stylish new clothes for the 2022 summer season.

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revolve is also making heavy use of its ambassador program, where it makes marketing and revenue-sharing deals with popular social media influencers who promote revolve products to their followers. It also just signed top model Kendall Jenner as creative director of fwrd, her luxury website that’s separate from revolve’s flagship website. The partnership started in September of last year, but seems to be going well so far. future revenue grew 83% year over year in the fourth quarter to $39.8 million.

In 2021, revolve group generated $891 million in revenue, up 54% from 2020, and $100 million in net income, up 76% from 2020. with a current market capitalization of $4.2 billion Dollars, Revolve shares have a trailing price earnings ratio (P/E) of 42, which is much higher than the S&P 500 average of 26.3. At first glance, this dichotomy might make you think it’s time to stay away from the shuffle group stocks. But investors should remember that in 2021 the company was still operating against a headwind with many in-person events canceled or delayed until 2022. In the US, revolve’s net income could grow substantially in 2022 and 2023, which could cause its p/e to decline rapidly.

2. callaway: much more than golf clubs

Many of you know callaway golf (ely 1.03%) as one of the best golf club and ball brands in the world. that business was still cooking during the pandemic because golf was one of the few relatively unrestricted activities. It produced $983 million in revenue in 2020 and $1.23 billion in revenue in 2021. So what makes Callaway a reopening stock? one word: top golf.

topgolf is a golf technology and entertainment company. operates huge driving ranges that focus less on golf training and more on creating a social atmosphere where groups can play and track their shots using topgolf’s toptracer technology. places also serve food and sell golf equipment. callaway decided to buy topgolf in late 2020 and closed the deal in early 2021.

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last year, the topgolf segment generated just over $1 billion in sales for callaway, which would have been higher had it owned topgolf for the entire 12-month period. and this was with the business losing demand for large groups and events in 2021 when the pandemic was still raging. however, that seems to be reversing in many of its locations. In the fourth quarter of 2021, same-venue sales increased 6% compared to 2019, which management said was due to strong walk-in traffic and more social events. this tells me that topgolf is finally getting back on track and should have full spots as we go through 2022.

there are 75 topgolf locations open worldwide, 68 of which are in the us. uu. last year it opened nine new branches and in 2022 it plans to open 10 more. Combine this steady clip of new locations with 5% to 6% same-location sales growth, and topgolf could grow its top line at a rapid pace for years to come.

In addition to the venues, topgolf licenses its toptracer technology to other driving ranges and earns subscription fees and revenue sharing when the systems are used. In 2021, the company installed TopTracer in 7,000 driving bays and plans to install them in 8,000 more by 2022. This is a small part of TopGolf’s business at the moment. it’s not clear how big it can get, but it should have very high margins and could be a good addition to the established business over time.

At the time of this writing, Callaway stock has a market capitalization of $4.6 billion. Subtracting its $352 million cash pile and adding $1 billion in long-term debt, it has an enterprise value of about $5.2 billion. it is difficult to value the business as it has so many different parts and is still absorbing the topgolf acquisition. but if you think the golf club business can be a long-lasting one and topgolf can grow its top line by 10% or more per year for the foreseeable future, then callaway stock is likely to be a great buy right now .

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