Lessons From 2008 Crisis: Could Boston Scientific Stock Underperform Post Coronavirus?

by Trefis Team
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While Boston Scientific’s (NYSE: BSX) stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back, as the crisis winds down. However, the growth from the lower levels could potentially be slower than the broader S&P.

On Monday, March 9, the U.S. markets saw their 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. Boston Scientific  stock fell 9% on Monday and is down by a total of 19% since early February, considering the impact that the outbreak and a broader economic slowdown could have on the company’s sales, both in China and rest of the world. The overall decline in procedures in China, and supply chain disruptions from China are the key cause of concern for Boston Scientific in the near term. Moreover, over 18% of Boston Scientific’s total sales are generated from the Asia Pacific region, which has been the worst impacted by the outbreak. However, going by the trends seen during the 2008 economic slowdown, it’s likely that Boston Scientific stock could bounce back strongly, though it may not outperform the market, as the crisis winds down.

While the current crisis can impact the company’s revenues in the near term, we believe the medium to long term story for Boston Scientific is intact, and any decline in stock prices could be an opportunity for long term buying. Boston Scientific has seen high single-digit average revenue growth over the past few years, and this trend is expected to continue in the coming years, led by the company’s new product launches. In our analysis on Boston Scientific’s Revenues, we discuss the factors that are driving the company’s growth in more detail.

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

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

  • Boston Scientific stock declined by about 9% on Monday, March 9th, and the stock is down by about 19% 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.

Boston Scientific Stock versus the S&P 500 During 2007-08 Financial Crisis

  • BSX stock declined from levels of around $14 in October 2007 (the pre-crisis peak) to levels of around $7 in March 2009 (as the markets bottomed out) and recovered to levels of about $9 in early 2010.
  • Through the crisis, BSX stock declined by as much as 50% from its approximate pre-crisis peak. This marked a similar decline as seen in the broader S&P, which fell by as much as 51%.
  • The stock recovered from the lows, rising by 28% between March 2009 and January 2010. However, the growth was slower than the S&P, which rose by about 48% over the same period.

Conclusion

  • While Boston Scientific 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, as the crisis winds down. However, the growth from the lower levels could potentially be slower than the broader S&P.
  • Interestingly, we noticed a similar trend with Abbott Labs, where it underperformed the broader market, while recovering from 2009 lows.

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

 

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