HBCYF - HSBC: Limited Upside Potential With Some Headwinds (Rating Downgrade)

2024-05-06 15:12:43 ET

Summary

• HSBC's Q1 earnings fell, driven by increasing Expected Credit Losses and overhead costs, reflecting potential stress signs.
• The company announced a share buyback and dividend, boosting the stock price in the short term.
• Geopolitical risks pose a headwind for the company.
• With the increased stock price, the majority of good news has already been baked-in and there is limited further upside potential for investors thinking of initiating new positions in HSBC in my view.

Overview

In my last article on HSBC ( HSBC ) in Feb 2024, I had rated the stock as a buy, with a 28% upside potential and a fair value of $50 / share. The company recently released its Q1 earnings on 30 April, and the stock price jumped by ~5% last week- with majority of the gains occurring post the earnings release. Since my last recommendation, the stock has already gained over 10% in 3 months (vs. 3.24% for S&P 500)....

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