Why State Street Stock Doesn’t Have Much Room For Growth At $65

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State Street’s stock (NYSE: STT) has rallied 60% over recent weeks (vs. about 34% gain in the S&P 500) to its current level of around $65 after falling to a low of $43 in late March as a rapid increase in the number of Covid-19 cases outside China spooked investors. While the stock remains about 15% below the $78 peak it reached in mid-February, we believe it is likely to hover around the current level for some time, with any additional upside looking difficult even when fears surrounding the coronavirus outbreak are abated. Our conclusion is based on our detailed comparison of State Street’s stock performance during the current crisis with that during the 2008 recession in an interactive dashboard analysis.

How Did State Street Stock Fare During The 2008 Downturn And What Does It Mean For The Stock This Time Around?

We see STT stock declined from levels of around $57 in October 2007 (the pre-crisis peak) to roughly $21 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 63% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.

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However, STT recovered strongly post the 2008 crisis to about $36 in early 2010 – rising by 73% between March 2009 and January 2010. On the other hand, the S&P bounced back by about 48% over the same period.

In comparison, STT stock lost 45% of its value between the market peak on February 19 to the low on March 23 and has already bounced back 60% since then. Keeping in mind the trajectory over 2009-10, this suggests that the stock has exhausted its upside potential and is likely to hover around the $65-level for some time, even after the economic conditions begin to show signs of improving. This marks a partial recovery to the $78 level STT stock was at before the coronavirus outbreak gained global momentum.

 

The rally across industries over recent weeks can primarily be attributed to the Fed stimulus, which put investor concerns about the near-term survival of companies to rest. The gradual lifting of lockdowns globally has also helped the demand for some non-essential goods recover. Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new COVID-19 cases in the U.S. to buoy market expectations. While Q2 results will be weak, investors will focus their attention on 2021 results – helping State Street stock maintain its current level. More information about State Street’s revenues and forecast for 2020-2021 is available in our interactive dashboard.

While State Street’s stock is likely to trade sideways for some time now, there might be a better opportunity when you compare Charles Schwab with Intercontinental Exchange.

 

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