More Than A Full Recovery Possible For Accenture’s Stock Post COVID-19 Crisis?

Comparing the trend in Accenture PLC’s (NYSE: ACN) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock could potentially recover to levels slightly higher than pre-crisis levels, once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of ACN’s performance vs the S&P 500 in our interactive dashboard analysis, 2008 vs. 2020 Crisis Comparison: How Did Accenture pls Stock Fare During Coronavirus Crisis Compared to S&P 500?

The World Health organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The S&P 500 peaked on 19th February 2020 amidst signs of effective containment in China and hopes of monetary easing by major central banks. Between February 19th and March 27th, ACN stock lost ~25% of its value (vs. a 25% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

Accenture’s Stock Has Fallen Considerably Because The Situation On The Ground Has Changed

• Professional services companies’ stocks generally move in tandem with the broader market trend and economic growth trends, as a slowdown in overall economic growth is likely to soften demand for external consulting services.
• A fall in demand is likely to put immense pressure on the company’s revenues in 2020, leading to a sharp drop in the company’s stock price.
• We believe ACN’s 1H 2020 results will confirm this reality with a drop in revenues.
• If signs of coronavirus containment aren’t clear by the Q2 earnings timeframe, it’s likely ACN’s stock, along with the broader market, is going to see continued drop when results confirm palpable reality.

But Accenture’s Stock fared equally badly during the 2008 downturn. We see ACN stock declined from levels of around $31 in October 2007 (the pre-crisis peak) to roughly $23 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 26% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.
However, ACN recovered slowly post the 2008 crisis to about $34 in early 2010 – rising by 45% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will Accenture’s Stock Recover Similarly From The Current Crisis?

• Keeping in mind the fact that ACN stock has fallen by ~25% this time around compared to the 26% decline during the 2008 recession, we believe it could potentially recover to a little above pre-crisis levels (around $220), once economic conditions begin to show signs of improving.
• That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.
• Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak’s impact on Accenture’s stock. The complete set of coronavirus impact and timing analyses is available here.

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