MetLife Stock Has A 44% Upside To Its Pre-Inflation Peak

+21.52%
Upside
74.22
Market
90.19
Trefis
MET: MetLife logo
MET
MetLife

MetLife stock (NYSE: MET) currently trades around $50 per share, around 30% below (more than 44% upside) its level of approximately $72 on April 20, 2022 (pre-inflation shock high), and has the potential for sizable gains. MetLife saw its stock trading at around $63 at the end of June 2022, just before the Fed started increasing rates, and is still 20% below that level. In comparison, the S&P 500 gained about 13% during this period. The stock price has suffered over recent months due to the fear of an economic crisis after the collapse of Silicon Valley Bank (SVB), coupled with lower-than-expected results in Q4 2022 and Q1 2023. 

Returning to the pre-inflation shock level means that MET stock will have to gain more than 44% from here. However, we do not believe that will materialize in a quarter or two because of investor concerns over a potential recession due to tough macroeconomic conditions. Notably, the pre-inflation shock high is slightly below MetLife’s valuation estimate of $75 per share, which also suggests that the stock is undervalued. 

Our detailed analysis of  MetLife’s upside post-inflation shock captures trends in the company’s stock during the turbulent market conditions seen over 2022 and compares these trends to the stock’s performance during the 2008 recession.

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2022 Inflation Shock

Timeline of Inflation Shock So Far:

  • 2020 – early 2021: Increase in money supply to cushion the impact of lockdowns led to high demand for goods; producers unable to match up.
  • Early 2021: Shipping snarls and worker shortages from the coronavirus pandemic continue to hurt supply
  • April 2021: Inflation rates cross 4% and increase rapidly
  • Early 2022: Energy and food prices spike due to Russian invasion of Ukraine. Fed begins its rate hike process
  • June 2022: Inflation levels peak at 9% – the highest level in 40 years. S&P 500 index declines more than 20% from peak levels.
  • July – September 2022: Fed hikes interest rates aggressively – resulting in an initial recovery in the S&P 500 followed by another sharp decline
  • Since October 2022: Fed continues rate hike process; improving market sentiments help S&P500 recoup some of its losses

 

In contrast, here’s how MET stock and the broader market performed during the 2007/2008 crisis.

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

MET and S&P 500 Performance During 2007-08 Crisis

MetLife stock declined from nearly $65 in September 2007 (pre-crisis peak) to below $17 in March 2009 (as the markets bottomed out), implying MET stock lost almost 74% of its pre-crisis value. It recovered post the 2008 crisis to levels of around $32 in early 2010, rising 92% between March 2009 and January 2010. The S&P 500 Index saw a decline of 51%, falling from levels of 1,540 in September 2007 to 757 in March 2009. It then rallied 48% between March 2009 and January 2010 to reach levels of 1,124.

MET Fundamentals Over Recent Years

MetLife revenues decreased by 3% from $69.6 billion in 2019 to $67.8 billion in 2020 due to a drop in net investment income, before increasing by 5% in 2021. The top line again suffered a 2% drop in 2022  to $69.9 billion due to lower net investment income and net investment losses, despite strong growth in premiums.

Similarly, earnings decreased from $6.10 in 2019 to $5.72 in 2020, before improving to $7.36 in 2021. It declined to $2.93 in 2022, mainly due to an unfavorable increase in total expenses as a % of revenues.

Conclusion

With the Fed’s efforts to tame runaway inflation rates helping market sentiments, we believe MetLife (MET) stock has the potential for strong gains (more than 44%) once fears of a potential recession are allayed.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.

 Returns Jun 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 MET Return 2% -30% 2%
 S&P 500 Return 2% 11% 90%
 Trefis Multi-Strategy Portfolio 1% 10% 248%

[1] Month-to-date and year-to-date as of 6/2/2023
[2] Cumulative total returns since the end of 2016

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