Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

Want to Retire Rich? Avoid These 2 Super Risky Stocks

Stock MarketsJan 19, 2021 09:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
Want to Retire Rich? Avoid These 2 Super Risky Stocks

The airline and entertainment industries are among the hardest hit by the 2020 pandemic. COVID-19 brought massive destruction to the operations of erstwhile viable investments. If you’re looking to retire rich, stay clear of Air Canada (TSX:AC) and Cineplex (TSX:CGX). Both are two super risky stocks because recovery is very uncertain.

Dominant air carrier in distress The impact of COVID-19 on the airline business is unprecedented. Air Canada investors lost 53% in 2020 after the coronavirus virtually reduced passenger travel demand to zero. Canada’s flag carrier’s share price as of this writing is $22.92, or 56% lower than a year ago.

In the most recent quarterly report (quarter ended September 30, 2020), Air Canada’s total revenue fell sharply by 86% to $757 million. The company also reported a negative EBITDA of $554 million compared to the $1.47 positive EBITDA in Q3 2020.

It’s been three consecutive quarters of losses, which negates Air Canada’s record of the 27 straight quarters of profits before the pandemic. As part of its recovery plan, management announced in November 2020 the downsizing of aircraft and workforce to mitigate the mounting losses.

Air Canada expects the fleet restructuring and rationalizing to lower capital expenditures in 2020 to 2023 by around $3 billion. Thus far, the $6.79 billion airline company has laid-off 20,000 workers. Analysts forecast the stock to climb by 53% to $35 in the next 12 months, although it hinges how quickly travel demand will return to pre-corona levels.

Former Dividend Aristocrat in oblivion Cineplex lost its Dividend Aristocrat status after the company suspended dividend payouts in early 2020. The iconic entertainment stock lost 72% last year, which is a bitter pill shallow. Loyal investors were receiving an average 5.97% dividend over the previous five years.

In the nine months ended September 30, 2020, Cineplex’s revenue dropped a whopping 70.1%, from $1.2 billion to $365.8 million. Theatre attendance fell 75.2% to 12 million. Net loss for the first nine months of 2020 was $393.6 million versus the $31.8 million net income in the same period in 2019.

The bread-and-butter box office revenue decreased by 91.8% to $14.5 million. Meanwhile, theatre food service revenue also fell significantly (88.1%). The digital commerce segment was the only bright spot as total registered users for the Cineplex Store increased by 41% in Q3 2020 versus Q3 2019.

Cineplex’s economic pain began on March 16, 2020, after the World Health Organization (WHO) officially declared COVID-19 as a global pandemic. It was the trigger for the unceremonious business disruption of Canada’s beloved entertainment and media company.

This year isn’t looking any better for Cineplex. The vaccination campaign will not guarantee movie operations to return to normal. Social distancing measures will remain in place for an extended period. People are not likely to congregate in indoor places for fear of contracting the more lethal COVID strain.

Cineplex has lost its appeal that it wouldn’t be wise to purchase even at its current depressed levels. It will take time for the company’s core business to generate significant cash flows like before.

Big gamble Air Canada and Cineplex are among the TSX’s cheapest stocks in 2021. However, growth or recovery might not come at all in the near future. It would be a useless expense and a big gamble to initiate positions in either stock.

The post Want to Retire Rich? Avoid These 2 Super Risky Stocks appeared first on The Motley Fool Canada.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2021

This Article Was First Published on The Motley Fool

Want to Retire Rich? Avoid These 2 Super Risky Stocks

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email