Today I’m looking at the possible share price direction of three FTSE-listed fallers.
Bank on the backfoot
Banking giant HSBC (LSE: HSBA) continues to frazzle investor nerves as fears over economic cooling in its critical Chinese marketplace intensify. The business has seen its share price erode 14% since the turn of 2016, including a 7% fall punched in February.
‘The World’s Local Bank’ announced last month that underlying revenues tanked 8% year-on-year between October and December, to $12.9bn. And worryingly HSBC warned that “China’s slower economic growth will undoubtedly contribute to a bumpier financial environment,” pointing to further weakness down the line.
Meanwhile, the company’s high exposure to the commodity markets prompted a gargantuan $1.6bn impairment charge in the fourth quarter, while PPI-related charges are also expected to keep chugging higher — the bank hiked provisions by $549m last year.
I’m convinced that the long-term promise of HSBC’s Asian markets remains intact amid galloping affluence and population levels. However, the prospect of worsening macroeconomic turbulence could put paid to returns in the more immediate future, a potentially-crushing prospect for the share price.
In rude health
Investors have also fallen out of love with drugs giant AstraZeneca (LSE: AZN) in recent weeks, the stock conceding 8% of its value during the month of February alone.
The market was spooked after the Cambridge business warned that sales should experience a âlow to mid single-digit percentage declineâ in 2016 thanks to the overhanging problem of patent losses across key labels.
AstraZeneca is relying heavily on development of the next generation of sales drivers to put the problem of exclusivity losses to bed and get earnings chugging higher again.
But the business of drugs development is naturally a hit-and-miss business, as illustrated by news this week that AstraZeneca’s much-awaited tremelimumab cancer battler failed to yield positive results when administered on its own. Oncology has been identified as one of the company’s future growth areas.
Still, I believe AstraZeneca remains a hot stock prospect for the coming years. Despite Monday’s disappointing testing news, the pharma giant still has a terrific record of getting product to market, assisted by vast organic investment not to mention the firm’s ongoing M&A drive. And I expect revenues to explode in the years ahead as medicines demand in established and emerging markets ignites.
Digger dives
Like HSBC and AstraZeneca, mining specialist Xtract Resources (LSE: XTR) also had a month to forget in February, the stock conceding 17% of its value during the period. And I believe the business could have much further to fall in the near term and beyond.
Xtract Resources bounced early last month after receiving approval to reopen its Chepica copper and gold project in Chile following recent earthquake activity.
But investor appetite has deteriorated since as fears concerning future revenues have emerged again — the business saw revenues sink 16% during October-December, to $375.8m, thanks to deteriorating ore grades.
And while copper prices have recovered more recently, I believe a backcloth of slowing demand and abundant market supply could continue to hamper Xtract Resources’s sales performance. As a consequence I believe the business remains a risk too far for savvy investors.