Five years on from the COVID market crash and there are still a number of stocks that haven't fully recovered, some of which are highly rated by analysts.
Stock markets plummeted on Monday 24 February 2020, as fears grew about the spread of COVID-19.
"When markets closed on the Friday, investors were nervous about what was unfolding, but few people had any idea that come the following Monday asset prices would experience the fastest decline since the global financial crisis in 2008," said Dan Coatsworth, investment analyst at AJ Bell (AJB.L).
“Over a four-week period, markets fell fast and hard, leaving investors panicking and portfolios bashed and bruised."
Many of the major markets did rebound, as central banks and governments stepped in to support economies, while the creation of COVID-19 vaccines helped facilitate a return to everyday life.
Even so, in financial markets there are still a number of stocks that haven't fully returned to trading at their pre-COVID share prices.
The broader FTSE 100 (^FTSE) index is up 17% over the past five years, while the FTSE 250 (^FTMC) is down less than 4.5% in that time. The combination of those two indices, the FTSE 350 (^FTLC) is up nearly 14% over that period. However, 162 of the companies listed in the FTSE 350 (^FTLC) are trading below the point when markets plunged around the world in February 2020.
“Admittedly, certain stocks have suffered problems unrelated to the pandemic, but there is a common theme among laggards," said Coatsworth. "They’re victims of the rise in inflation driven by supply chain disruption during COVID."
“Russia’s invasion of Ukraine exacerbated the situation and caused inflation to become angry, leading to a rapid increase in costs and interest rates, hurting companies and their customers."
Data provided by AJ Bell highlighted examples of stocks within that group that were down more than 30% over a five year basis. Of that list, these are the stocks that are highly rated by investment analysts.
Shares in housebuilder Persimmon (PSN.L) are down 17% over the past year and 60% over the last five years.
"Housebuilders have suffered from cost inflation, a muddled planning system, residential house price growth slowing after a burst of life between 2020 and 2022, and aspiring homeowners not being able to afford to get on the housing ladder due to high mortgage rates," said Coatsworth.
While Persimmon (PSN.L) was one stock impacted by the downbeat mood in the sector, a recent trading update on its full-year performance gave investors reasons to be positive.
Full year completions of new homes were up 7% at 10,664, coming in ahead of market expectations and underlying profit before tax is expected to be at the upper end of market expectations (£349m to £390m).
In a note following the release of the trading update, Deutsche Bank (DBK.DE) research analysts upgraded their rating on the stock from "hold" to "buy".
"Whilst we think other companies are better placed for a recovery in volume/profits, after the c.40% decline in Persimmon's (PSN.L) share price since mid-October, we think that valuation attractions are emerging, even with the prospect of future returns being much lower than pre-COVID levels," they said.
The pandemic dealt a heavy blow to airlines, as flights were cancelled and travel restrictions were put in place, with the sector taking some time to recover.
"Airline debts ballooned and certain companies came out of the pandemic in a terrible financial shape," said AJ Bell's (AJB.L) Coatsworth. "It’s been one of the last sectors to properly recover but life hasn’t been easy of late, with ongoing cost pressures and earnings hit by having to cut fares."
EasyJet (EZJ.L) shares have fallen 11% over the past year and are down 55% in the five years since the COVID market crash.
While EasyJet (EZJ.L) reported a loss before tax of £61m ($77m) in the first quarter, this was an improvement of £65m year-on-year.
The airline guided to slightly weaker revenue in the second quarter but maintained a positive outlook for 2025 as a whole and said it was on track to achieve a medium-term of £1bn profit before tax.
Barclays (BARC.L) analysts have maintained an "overweight" rating on the stock.
In a note released on 15 January, prior to EasyJet's first quarter trading update, Barclays (BARC.L) analysts said: "We expect earnings momentum to continue through FY25, driven by efforts to reduce winter losses through increasingly focused winter sun flying, continued growth of the Holidays business and the summer 2025 launch of the Milan Linate base."
Shares in luxury carmaker Aston Martin (AML.L) were already on a downward path after the company went public in 2018, but the pandemic put further pressure on the business, seeing losses soar as sales plunged.
The FTSE 250 (^FTMC) stock is down 90% over the past five years and 50% in the last year, as its struggles have continued.
Aston Martin (AML.L), which is famed for its association with the James Bond films, issued another profit warning in November. The carmaker said that it expected profit to come in at between £270m and £280m for the 2024 year. The company attributed this shortfall to mitigating the financial impact of a "minor delay in a small number of deliveries" of its "ultra-exclusive" Valiant model.
Aston Martin, which is famed for its association with the James Bond films, issued another profit warning in November ·John Keeble via Getty Images
The profit warning came alongside an announcement that it was looking to raise around £210m to fund its long-term growth plans.
Despite the company's struggles, Barclays analysts have maintained an "overweight" rating on the stock.
In a note on 28 January, Barclays analysts said: "Given that AML (AML.L) has not warned the market to expect anything different than achieving its (updated) FY guidance (historically there have been some guidance adjustments in early January), we anticipate that the revised Q4/FY24 volume guide will have been met, facilitating higher operating leverage and strong sequential earnings improvement in line with our/consensus estimates.
"The order book growth in the context of a refreshed model line-up and the (smoother) volume trajectory in 2025 remain key areas of focus," they added.
Drinks company Diageo (DGE.L), whose brands include Guinness and Smirnoff, is another stock that Barclays analysts have kept an "overweight" rating on.
The stock is down 30% over one year and nearly 25% over the past five years.
In its interim results, released in early February, Diageo (DGE.L) reported a return to growth in organic net sales, which were up by 1% to $10.9bn (£8.6bn).
However, Diageo (DGE.L) said it had removed medium-term guidance due to the current macroeconomic and geopolitical uncertainty in many of its key markets, impacting the pace of recovery.
In a note released on the back of the results, Barclays analysts said that while they continued to believe that the US spirits market would see further recovery, US trade tariffs bring short-term uncertainty for the company.
"It is hard to make a firm conclusion from these results," they said. "On the positive side, four out of five divisions are in growth, with strong momentum in some key brands. On the flip side, the guidance has been withdrawn and consensus is being downgraded, which could either be interpreted as increased market uncertainty coupled with structurally weaker consumers or simply an attempt to underpromise."
Hospitality was among the sectors to suffer the most during the pandemic, as lockdown restrictions forced businesses to close their doors until measures eased.
Pub chain operator JD Wetherspoon posted a record loss of £154.7m in 2021, following national lockdowns.
While the business has continued to recover and returned to profit, shares are still underperforming, down 25% over the past year and 56% on a five-year basis.
In a January trading update, JD Wetherspoon said like-for-like sales were up 5.1% in the first half of its fiscal year. However, chairman Tim Martin warned of higher costs on the back of increases to employer national insurance contributions and the national minimum wage, announced in the autumn budget.
AJ Bell's Coatsworth said: "Wetherspoons is an obvious candidate for getting back to pre-COVID share price levels, albeit it could take a while."
He pointed out that weaker operators are struggling in the current environment, with the British Beer and Pub Association finding that nearly 300 pubs closed last year in the UK.
"That means reduced competition for Wetherspoons, which is still standing strong," he said. "Net profit isn’t quite back to pre-COVID levels, but the direction of travel is positive. Admittedly, there are cost headwinds for the group this year, but someone with a three to five-year view might feel confident that Wetherspoons keeps pushing forward and so might its share price."
Many of these stocks operate in sectors that are still recovering from the pandemic and the period of high inflation that followed. While concerns around tariffs and higher business costs in the wake of the budget present further headwinds, analysts appear optimistic in the fundamentals of these businesses.
