Will Abbott Stock Outperform The Broader Market Post Coronavirus?

by Trefis Team
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Abbott’s (NYSE: ABT) stock could outperform the broader S&P 500 index post coronavirus and oil price war crisis, going by trends seen during the 2008 slowdown, where it fell 11% from the approximate pre-crisis peak in 2008, and recovered 17% by early 2010. The decline in Abbott’s stock and recovery was lower than that of the S&P 500.

On Monday, March 9, the stock market saw its biggest sell off since the 2008 crisis. There were two distinct trends driving the sell-off. Firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production. Abbott stock fell 6% on Monday and is down by a total of 12% since early February, considering the impact that the outbreak and a broader economic slowdown could have on the company’s shipments, particularly in China. The overall decline in procedures and supply chain disruptions are the key cause of concern for Abbott in the near term. Also, over 7% of Abbott’s total sales are generated from China, which has been the worst impacted by the outbreak. However, going by the trends seen during the 2008 economic slowdown, it’s likely that Abbott stock will bounce back, and it may outperform the overall market, as the crisis winds down.

While Abbott could witness near term disruptions from supply chain, and impact on overall sales, it will likely bounce back strongly. The company has been in a strong position since its acquisitions of St Jude Medical and Alere. It has seen low double-digit average revenue growth over the past few years, higher than that for its peers, Boston Scientific and Medtronic. Its pathbreaking FreeStyle Libre has been a great success story. In our analysis on Abbott’s Revenues, we discuss in detail the factors that are driving the company’s growth. Overall, Abbott appears to be in a great place with growth across geographies, and the recent dip in stock price could be seen as a buying opportunity for long term investors.

In this analysis, we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. View our complete dashboard analysis on 2007-08 vs. 2020 Crisis Comparison: Abbott Laboratories Compared To S&P 500.

Abbott Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

  • Abbott stock declined by about 6% on Monday, March 9th, and the stock is down by about 12% since February 1, after the WHO declared a global health emergency.
  • The S&P 500 declined by 7.6% on Monday and has fallen by 17.5% since February 1.

Abbott versus the S&P 500 During 2007-08 Financial Crisis

  • ABT stock declined from levels of around $20 in October 2007 (the pre-crisis peak) to levels of around $17 in March 2009 (as the markets bottomed out) and recovered to levels of about $20 in early 2010.
  • Through the crisis, ABT stock declined by as much as 11% from its approximate pre-crisis peak. This marked a much lower decline compared the broader S&P, which fell by as much as 51%.
  • ABT stock recovered from the lows, rising by 17% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

Conclusion

  • While Abbott stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 slowdown, it’s likely that it will bounce back, and it may outperform S&P 500, as the crisis winds down.
  • In comparison, we noticed a similar trend with Boston Scientific, which underperformed the broader market growth after the 2007-08 crisis.

For more detailed charts and a timeline of the 2007-08 crisis, view our dashboard analysis 2007-08 vs. 2020 Crisis Comparison: Abbott Stock Compared To S&P 500.

 

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