HSBC Stock Is Up 8% YTD, What To Expect?

+9.82%
Upside
47.35
Market
52.00
Trefis
HSBC: HSBC Holdings logo
HSBC
HSBC Holdings

HSBC’s stock (NYSE: HSBC) has gained 8% YTD as compared to the 9% rise in the S&P500 index over the same period. Further, at the current price of $44 per share, it is 16% below its fair value of $52 – Trefis’ estimate for HSBC’s valuation

Amid the current financial backdrop, HSBC stock has seen extremely strong gains of 80% from levels of $25 in early January 2021 to around $45 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. HSBC is one of a handful of stocks that have increased their value in each of the last 3 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 16% in 2021, 3% in 2022, and 30% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that HSBC underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could HSBC face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

The company surpassed the consensus estimates in the first quarter of 2024. It reported GAAP revenues of $20.75 billion – up 3% y-o-y. It was due to a significant jump in corporate & other revenues from $73 million to $3.6 billion. The segment growth was mainly driven by a $4.8 billion gain from the completion of the disposal of banking business in Canada, partly offset by a $1.1bn impairment because of the classification of Argentina business as held for sale. That said, commercial banking revenues decreased 17% y-o-y followed by a 21% drop in the wealth & personal banking business. On the cost front, total expenses as a % of revenues increased in the quarter, leading to a 2% drop in the profit before tax. Overall, profit after tax declined 2% y-o-y to $10.84 billion. 

Relevant Articles
  1. Up 24% Since The Beginning Of 2023, What Should You Expect From HSBC Stock?
  2. Where Is HSBC Stock Headed?
  3. What To Expect From HSBC Stock?
  4. Is HSBC Stock Undervalued?
  5. What To Expect From HSBC Stock?
  6. Is HSBC Stock Still Attractive?

The company’s top-line improved 30% y-o-y to $66.06 billion in FY 2023. it was primarily driven by a 29% rise in wealth & personal banking and a 39% increase in the commercial banking segments. Further, total expenses as a % of revenues witnessed a favorable drop in the year. Altogether, the profit after tax figure rose by 51% to $24.6 billion.

Moving forward, we expect the NII to drive growth in Q2 as well. Overall, we estimate HSBC revenues to touch $67.8 billion in FY2024. Additionally, HSBC’s adjusted net income margin is likely to increase in the year due to higher revenues and lower expenses. This coupled with a GAAP EPS estimate of $6.14 and a P/E multiple of just above 8x will lead to a valuation of $52.

 Returns May 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 HSBC Return 1% 8% 22%
 S&P 500 Return 4% 9% 133%
 Trefis Reinforced Value Portfolio 4% 4% 636%

[1] Returns as of 5/14/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates