Medtronic Stock To See Over 20% Uptick Post Coronavirus?

by Trefis Team
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Medtronic (NYSE: MDT) stock could see growth of over 20% from the recent lows of around $85 levels, going by trends seen during the 2008 slowdown. It is likely that Medtronic stock could bounce back strongly and potentially outperform the broader market, when the coronavirus and oil price war crisis winds down. During the 2007-08 crisis, the stock fell and recovered in line with the broader S&P 500 index.

Earlier this week on Monday, March 9, the stock 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 30% in March so far, after Saudi Arabia increased production. Medtronic stock fell 8% on Monday and is down by a total of 27% since early February. There has been a continued drop over the last week or so considering the impact that the Coronavirus outbreak
and a broader economic slowdown could have on its supply chain.  The overall decline in procedures and supply chain disruptions are the key cause of concern for Medtronic in the near term. Moreover, over 7% of Medtronic’s total sales are generated from China, which has been the worst impacted by the outbreak.

While Medtronic could face near term issues due to supply disruptions, its long term growth story remains intact. The company has seen low double-digit average annual revenue growth over the past few years, led by strong adoption for its products. The company’s revenues are expected to grow in mid-single-digits on average in the coming years. In our dashboard analysis on Medtronic Revenues, we discuss the factors driving revenue growth for the company in detail. As such, the decline in stock price in the recent stock market meltdown amid coronavirus outbreak and the oil price war could be a good opportunity for long-term investors, as the crisis winds down.

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: Medtronic Stock Compared with S&P 500

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

  • Medtronic stock declined by about 8% on Monday, March 9th, and the stock is down by about 27% 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 23% since February 1.

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

  • MDT stock declined from levels of around $44 in October 2007 (the pre-crisis peak) to levels of around $23 in March 2009 (as the markets bottomed out) and recovered to levels of about $35 in early 2010.
  • Through the crisis, MDT stock declined by as much as 48% 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 50% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

Conclusion

  • While Medtronic 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 strongly and potentially outperform as the crisis winds down.
  • Medtronic’s stock performance was more in line with the broader index during the 2007-08 crisis, which was not the case for some of its peers, such as Abbott and Boston Scientific, which underperformed the growth from the lows.

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

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