If you invest in OUTFRONT or Clear Channel or if you own a transit or airport advertising company you should monitor how long it will be until vaccines end the Covid epidemic.   US airport travel was down 60% for the week ended November 29, 2020 versus the prior year. last year.   Transit ridership was off 65% this summer.  Neither will rebound until there is a vaccine.

OUTFRONT and Clear Channel get a large share of revenue from transit advertising, airport advertising and urban billboards around downtown office cores.  OUTFRONT has doubled from the March low.  Clear Channel has tripled.  Both stocks, however, are 35-45% off their pre-pandemic highs (see chart below) because transit, urban and downtown office traffic is off.  We’re leaving Lamar out of the analysis because it’s roadside billboard plant has recovered nicely from covid and the stock is within 12% of the pre-covid high.

Seeking Alpha did a bullish November 25, 2020 piece on OUTFRONT in which the analyst estimated that the US would reach herd immunity by having 70% of the US vaccinated in May 2020.  Insider thinks that this may be too optimistic due to logistics of manufacturing and administering the vaccine to 382 million people.    A November 23, 2020, McKinsey article is more cautious: “the United States will most likely reach an epidemiological end to the pandemic (herd immunity) in Q3 or Q4 2021”.

Insider has three thoughts:

• Air travel and mass transit and in office work will begin improving in the first quarter as soon as vaccines are being administered.  People with the vaccine will start traveling even if the US hasn’t yet reached herd immunity.   The first thing Insider is going to do after getting a vaccine is get on a plane and visit clients.
• We will return to normal in the second half of 2021.  It will take several months to roll out the vaccine and availability will probably go first to medical workers, the elderly and other high risk populations.
• Things will return to normal.  After every disruption there are a spate of stories talking about how the most recent disruption will change things forever.  And it doesn’t.  Ask yourself what behavior pattern of yours changed forever after 9/11.  Did you stop traveling?  Did you flee New York?

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