What’s Happening With Progress Software Stock?

Based on a comparison of Progress Software’s stock (NASDAQ: PRGS) trajectory over recent months with that around the 2008 recession, we believe that the stock can potentially gain 10% once fears surrounding the coronavirus outbreak are abated to reach $40, from current levels of $36. The stock lost more than 30% in 2008 and gained around 83% after that, however, this time around, it dropped 32% between Feb 19th and March 23rd, before improving by 21% since then – a partial recovery. A detailed comparison of Progress Software’s performance against the S&P 500 is available in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Progress Software Stock Fare Compared With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. PRGS stock lost 32% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 21% over recent weeks (vs. about a 48% gain in the S&P 500) to its current level of $36.

Progress Software’s Stock Fell Because The Situation On The Ground Has Changed

Progress Software is a U.S based Software Company that provides solutions for developing and deploying business applications. It offers tools for easily building adaptive user experiences across any type of device, the flexibility of a serverless cloud platform to deliver modern apps, data connectors, etc. The Covid-19 crisis has compelled businesses to re-think their IT spending to save costs. Companies are either postponing or slashing IT expenditure in the short term, investing in only business-critical projects. This is likely to impact Progress’ top line as both new deals and subscription revenues could suffer. On the flip side, Progress Software has a strong balance sheet and a large network of over 1,700 independent software vendors, 100,000 enterprise customers, and two million developers who use its offerings, enabling it to grow in the long term.

We believe Progress Software’s Q3 results will confirm this reality with a drop in both product licenses and subscription revenues. If signs of coronavirus containment aren’t clear by the September Q3 earnings timeframe, it’s likely Progress Software’s stock along with the broader market is going to see another round of sell-offs when results are well below expectations. 

But Progress Software Stock Witnessed Something Similar During The 2008 Downturn

We see PRGS stock declined from levels of around $13 in October 2007 (the pre-crisis peak) to roughly $7 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 50% of its value from its approximate pre-crisis peak. This marked a similar drop as the broader S&P, which fell by about 51%.

However, PRGS recovered strongly post the 2008 crisis to about $12 in early 2010 – rising by 83% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period. 

Will Progress Software’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that PRGS stock fell 32% from the market peak on February 19 to the low on March 23 compared to the 50% decline during the 2008 recession, we believe it can potentially bounce back (10%) to around $40 once economic conditions begin to show signs of improving. This marks a partial recovery to the $44 level PRGS stock was at before the coronavirus outbreak gained global momentum. 

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. Covid-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak’s impact on a diverse set of Progress Software’s multinational peers. The complete set of coronavirus impact and timing analyses is available here.

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