Investors have witnessed some very dramatic share price movements over the past few months as the market continues to respond to the coronavirus pandemic.
Fortunately, this has provided some interesting opportunities for investors to take a closer look at. Here are two to consider:
Aristocrat Leisure Limited (ASX: ALL)
This gaming technology company’s shares have fallen heavily this year and are trading 35% below their 52-week high. Investors have been selling the pokie machine manufacturer’s shares after casinos were closed because of the pandemic. While a pullback in its share price is not unwarranted, I believe the size of the pullback has been severely overdone. Especially given how Aristocrat’s digital business is cushioning the blow.
For example, during the first half the digital business reported an 18.5% increase in revenue to US$695.5 million. This was driven by 7.3 million daily active users spending an average of 50 U.S. cents per day. I’m confident that new releases, lockdowns, and increased mobile gaming will drive further digital growth in the second half and beyond. This could put Aristocrat in a position to accelerate its earnings growth once the crisis passes and casinos reopen. As a result, I think its shares are good value at 20x estimated FY 2021 earnings.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
The Sydney Airport share price has fallen 41% from its 52-week high. Investors have been selling the airport operator’s shares this year after the coronavirus pandemic practically brought its operations to a standstill. Once again, while some of this selling has not been unwarranted, I believe the size of its decline is overdone and has created a buying opportunity.
Although the current situation in Victoria has thrown a spanner into the works, I’m optimistic that the domestic tourism market will recover in 2021. After which, in 2022 I suspect international tourism will be recovering strongly. I expect this to lead to a dividend of 29 cents per share in 2021 and then ~37 cents per share in 2022. This implies yield of 5.3% and 6.7%, which I feel could make it well worth considering a patient investment in Sydney Airport’s shares.
Where to invest $1,000 right now
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.