The Motley Fool

JD Wetherspoon and Carnival shares: is now the time to buy ahead of a second lockdown?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image of person checking their shares portfolio on mobile phone and computer
Image source: Getty Images.

Investors in JD Wetherspoon (LSE: JDW) and Carnival (CCL) shares have already had a year to forget. Now, with some of the country poised for tighter lockdown restrictions — akin to a second lockdown for millions of people — things look like they’re about to get even worse.

Tighter restrictions mean that pubs will now close in the highest-risk areas. Nobody knows how long these restrictions will last. Likewise, with Covid cases escalating rapidly in most of Europe, companies that rely on travel look set for a prolonged bout of misery. There are now very few places abroad that UK citizens can travel to freely.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

While this undoubtedly affects a great many companies, Wetherspoon and Carnival could be impacted immediately. If I held either of these two FTSE 250 shares, I reckon I’d sell out now and invest in something that would help me sleep a bit better at night.

Last orders

Wetherspoon was quick to reopen after the initial lockdown closed all of its pubs back in March. By the end of August, more than 95% of its pubs had reopened. But not even Rishi Sunak’s Eat Out to Help Out scheme was enough to maintain revenues at last year’s levels. From the beginning of July to mid-August, like-for-like sales were 17% below the prior year.

Following lengthy pub closures and the erosion of profit margins, the company expects to make a loss for this year. That’s not exactly surprising. But Wetherspoon’s shares still look overpriced, in my opinion. The shares trade at 16 times last year’s earnings, a period that was unaffected by Covid. That wouldn’t be cheap in a normal year. New restrictions mean the group will remain unprofitable for longer and will take longer to recover. In my mind, that’s still not reflected in the Wetherspoon share price.

Carnival shares have further to sink

Carnival has been more affected by Covid than most, with its cruise business effectively shut down for six months. Only in the last month has the company resumed a very small number of its cruises. This is reflected in its financial performance. In the nine months to the end of August, the group made a whopping net loss of over £6bn, with revenue down 67% from the year before.

A deteriorating Covid outlook has forced the group to cancel the majority of its cruises until next spring. It still has £6bn in cash, but a monthly cash burn of over £500m means that might not last long. What’s more, the group has borrowed so much just to survive the next year that repayments are going to eat into profits for the foreseeable future. It owes £5bn in repayments in 2023 alone. The Carnival share price has already fallen over 70% this year, but I think it’s got further to fall yet.

Holding Wetherspoon or Carnival shares isn’t just about whether the companies will survive the next year or two. It’s also about what the travel and hospitality sectors will look like in a few year’s time. I have no doubt that the hospitality sector will eventually recover. But I do have doubts about what the cruise industry will look like in the future. For a good night’s sleep, I think it’s best to sell shares in these companies now. There are so many better companies to invest in.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Thomas has no position in any of the shares mentioned. The Motley Fool UK has recommended Carnival. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.