We believe this Manulife Financial Stocks (NYSE: MFC) has a potential to rise by 42% after the pandemic as the lower interest rate environment improves and GDP experiences some recovery. MFC is currently trading at $ 14 and has lost 31% in value since the start of the year. It was trading at a pre-Covid high of $ 20 in February and is currently 29% below that level. In addition, MFC stock is up 58% from the low of $ 9 seen in March 2020, after the multibillion dollar stimulus package announced by the US government, which helped the stock market recover in a large measure. The stock is in line with the broader markets (the S&P 500 is up around 55%), as investors’ outlook for the insurance industry in general has turned somewhat positive due to the government stimulus measures and net market gains. In addition, investors are hoping for an improvement in interest rates and GDP growth in the near term, which will lead to growth in total premiums and net investment income. Despite the strong rally in MFC stock since late March, we believe the stock has room for growth in the near future. Our conclusion is based on our detailed analysis of Manulife Financial’s stock performance during the current crisis versus performance during the 2008 recession in an interactive dashboard analysis.
Coronavirus crisis 2020
- 12/12/2019: Coronavirus cases first reported in China
- 01/31/2020: WHO declares global health emergency.
- 02/19/2020: Signs of effective containment in China and hopes of monetary easing from major central banks help S&P 500 reach record high
- 03/23/2020: S&P 500 34% drop of the maximum level observed on February 19, as cases of Covid-19 accelerate outside China. Doesn’t help that oil prices collapse in mid-March amid Saudi-led price war
- From 03/24/2020: S&P 500 recovers 54% from lows on March 23, as the Fed’s multibillion-dollar stimulus package removes short-term survival anxiety and injects liquidity into the system.
In contrast, here is how MFC and the broader market fared during the 2007/2008 crisis.
Timeline of the 2007-08 crisis
- 01/10/2007: Approximate pre-crisis peak of the S&P 500 index
- 09/01/2008 – 10/01/2008: Accelerated decline in the market corresponding to Lehman’s bankruptcy filing (09/15/08)
- 03/01/2009: Approximate low point of the S&P 500 index
- 1/1/2010: Initial recovery to pre-accelerated decline levels (around 1/9/2008)
Manulife Financial’s performance relative to the S&P 500 during the 2007-08 financial crisis
MFC’s stock fell from levels of around $ 42 in October 2007 (the pre-crisis peak) to around $ 10 in March 2009 (as markets bottomed out), implying that the stock has lost up to 76% of its value from its approximate pre-crisis level. peak of crisis. This marked a steeper decline than the broader S&P, which fell about 51%.
However, the MFC recovered sharply from the 2008 crisis to reach around $ 18 in early 2010, increasing 81% between March 2009 and January 2010. In comparison, the S&P rebounded by around 48% during the same period.
Manulife Financial’s fundamentals in recent years look strong
Manulife Financial’s revenues increased 49%, from $ 40.3 billion in 2016 to $ 60 billion in 2019, primarily driven by growth in insurance business in Asia and investment income from premiums in Asia. ‘assurance. Additionally, the company’s net income rose from $ 2.1 billion to $ 4.1 billion, which caused EPS to jump from $ 1.07 in 2016 to $ 2.09 in 2019. the Revenue for the quarter decreased 52% primarily due to a 67% increase in insurance contract liabilities.
Phases of the Covid-19 crisis:
- Beginning to mid-March 2020: Fear of the rapid spread of the coronavirus epidemic is reflected in reality, the number of cases accelerating in the world
- End of March 2020: social distancing measures + confinements
- April 2020: Fed stimulus suppresses short-term survival anxiety
- May-June 2020: Resumption of demand, with the gradual lifting of confinements – no more panic despite a steady increase in the number of cases
- July-October 2020: Poor Q2 results and mixed expectations for Q3, but continues improvement in demand, a decrease in the number of new cases, and advances in vaccine development boost market sentiment
Given the 2009-10 trajectory and given the improvement in Manulife Financial’s stock since late March, this suggests a potential rally to around $ 20 (42% increase) once economic conditions begin to show. signs of improvement. This marks a full recovery to the $ 20 level Manulife Financial stock was at before the coronavirus epidemic gained momentum globally.
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