Philip Morris stock (NYSE: PM) has rallied 34% in the last six months (126 trading days) and is currently trading at $95 per share. Despite belonging to a defensive sector (tobacco), the stock has been able to register healthy gains in the last few months with the company beating analysts’ expectations in Q1 2021 and providing an upbeat forecast for the coming quarters. Heated tobacco shipments increased by 30% y-o-y in Q1 2021, while the market share of heated tobacco units in markets where IQOS is sold was up 1.7% to reach 7.6%. With the vaping market expected to grow at a healthy double-digit rate in the coming years, Philip Morris is expected to benefit with higher IQOS sales. Also, though the steps contemplated by the U.S. government to make tobacco products less attractive (by reducing nicotine content in cigarettes) has taken a heavy toll on Altria’s stock, Philip Morris saw an increase as it does not operate in the U.S. market. But will PM’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for PM stock average close to -0.6% in the next one-month (21 trading days) period after experiencing a 34% rise over the previous six-month (126 trading days) period. Notably, though, the stock is likely to perform at par with the S&P500 over the next month, with an expected return which would be in line with the S&P500.
But how would these numbers change if you are interested in holding PM stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test PM stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
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MACHINE LEARNING ENGINE – try it yourself:
IF PM stock moved by -5% over five trading days, THEN over the next 21 trading days, PM stock moves an average of a little over 2 percent, which implies a return which is 2.5 percent higher than that of the S&P500.
More importantly, there is 67% probability of a positive return over the next 21 trading days but only 28% probability of a positive excess return after a -5% change over five trading days.
Some Fun Scenarios, FAQs & Making Sense of PM Stock Movements:
Question 1: Is the average return for Philip Morris stock higher after a drop?
Consider two situations,
Case 1: Philip Morris stock drops by -5% or more in a week
Case 2: Philip Morris stock rises by 5% or more in a week
Is the average return for Philip Morris stock higher over the subsequent month after Case 1 or Case 2?
PM stock fares better after Case 1, with an average return of 2.3% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Philip Morris stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Philip Morris stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For PM stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although PM stock appears to be an exception to this general observation.
PM’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Philip Morris stock by changing the inputs in the charts above.
While Philip Morris stock may have moved, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Coca-Cola vs Merck shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.