Chasing the S&P500: A Tough Competition for State Street Stock
State Street’s stock (NYSE: STT) has been playing catch-up, trailing the S&P500 by 14% year-to-date. The stock, currently priced at $74 per share, is deemed by Trefis to be undervalued at $85. This shortfall is indicative of STT’s rocky journey amidst financial fluctuations.
Storming Financial Frontiers: A Glimpse into State Street’s Recent Performance
STT stock experienced a rollercoaster ride in recent years, with a 28% rise in 2021, a plunge by 17% in 2022, and a stagnant performance in 2023. This stands in stark contrast to S&P 500’s returns of 27%, -19%, and 24% over the same period, respectively. The stock’s struggle to outshine the index mirrors a broader trend seen in the financial sector with giants like JPMorgan, Visa, and Mastercard, along with tech titans Google, Tesla, and Microsoft facing similar challenges.
A Bright Spot: State Street’s Q4 2023 Performance
Despite the hurdles, State Street managed to showcase strength in Q4 2023 by exceeding expectations. With total revenues of $3.04 billion (a 4% dip year-over-year), the bank witnessed a 14% rise in Assets under Custody & Administration (AuC/A) and a significant 19% surge in Assets under Management (AuM). However, the bottom line took a hit, with adjusted net income plummeting by 57% to $172 million due to a spike in total expenses.
Rough Waters Ahead: State Street’s Outlook for FY2024
Looking forward, State Street’s revenue forecast for FY2024 hovers around $12.3 billion, with an expected drop in adjusted net income margin compared to the previous year. This could translate to an annual GAAP EPS of $5.51. The stock’s valuation near 16 times earnings points to a fair value of $85, indicating a challenging road ahead for STT amidst volatile market conditions.
Comparative Performance Analysis: STT vs. S&P 500 vs. Trefis Reinforced Value Portfolio
| Returns | Mar 2024 MTD | 2024 YTD | 2017-24 Total |
| STT Return | 0% | -5% | -5% |
| S&P 500 Return | 2% | 9% | 131% |
| Trefis Reinforced Value Portfolio | 1% | 5% | 647% |
[1] Returns as of 3/21/2024
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
