I’ve looked at updates for three reopening stocks today, and they were largely positive. But their share prices have responded very differently from each other.
The first is DFS Furniture (LSE: DFS), which among all three has reported the sharpest uptick and seen big share price gains. Next, is the Go-Ahead Group (LSE: GOG), which delivered a mixed update and saw an almost unchanged share price. Last, is the greeting card retailer Card Factory (LSE: CARD), that investors have given a thumbs down to today.
To assess whether to buy them for the long term or not, however, I looked at their stories in a little more detail. Here is what I think
#1. DFS Furniture: I’d buy on a dip
The retailer actually expects to earn profits in its current financial year ending June 27. This is the standout feature for me in its latest trading update. As we know well, the last year has been awful for retailers. A slew of companies have gone under. That DFS Furniture has actually managed to not just survive, but actually thrive in this environment is a huge win, in my view.
It has been rewarded by investors too. Its share price is up a big 12% today following its update, reaching multi-year highs of 304p. This brings its annual price rise up to 78% now. I reckon this year could be even better for the company as the economy comes back to life. I would buy it on a dip, since it has run up quite a bit.
#2. Go-Ahead Group: reopening incomplete
FTSE 250 travel company, Go-Ahead Group also released a somewhat positive trading update for the year due to end in July. Passenger numbers are the highest since the pandemic, but they are still less than they were pre-pandemic. I reckon this can change over time though as we start travelling with greater confidence and fewer restrictions. Only then will travel stocks have truly reopened.
Another challenge here is that some of its rail contracts are approaching their end. It is in discussions for new contracts, but I do not know if they will come through and what they will be like. I think this makes its situation a bit more uncertain.
Investors have responded little to the update. Its share price is almost flat from yesterday, although it is still up around 7% over the year. But as the pandemic recedes, I reckon that it can do better. It has been a buy for me and I maintain that position.
#3. Card factory: Wait and watch
Card Factory is down almost 4% so far after it released results for the year ending January 31. The numbers were predictably bad, considering the lockdown.
But I found the post-reopening update disappointing. It said that the initial surge in demand has subsided after the pent-up demand was met. Still, I think there is potential in the stock going by its robust online performance and an improved consumer demand outlook. Its share price is still up 42% from a year ago. Just to be sure, though, I will wait for another update before buying the stock.
