A Microsoft store entrance with the company logo at the top in midtown Manhattan on 5th Avenue in … [+]
Microsoft (NASDAQ: MSFT) the stock was down about 8% between March 8, 2020 and March 24, 2020 (compared to an 18% decline in the S&P 500), and the stock is down nearly 13% since January 31 after the WHO has declared a global health emergency in light of the spread of the coronavirus (compared to the S&P 500’s decline of around 27% since then).
Looking back to the financial crisis of 2008, we see that Microsoft shares have fallen from levels of just over $22 in October 2007 (the pre-crisis peak) to levels near $12 in March. 2009 (when markets bottomed) – implying a 44% decline from its approximate pre-crisis peak. This marked a smaller decline than the broader S&P index, which fell 51%.
Will Microsoft’s stock similarly recover once the coronavirus outbreak is contained? We benchmark Microsoft’s performance against the S&P 500 in our interactive dashboard analysis,”Crisis 2007-08 vs 2020 comparison: How did Microsoft stocks fare against the S&P 500?”
Notably, Microsoft rebounded strongly from the 2008 crisis to reach levels of nearly $24 in early 2010, a 92% rise between March 2009 and January 2010. In comparison, the S&P rebounded from around 48% over the same period. While the stock has (so far) fallen about half of what it did during the 2008 crisis, it is possible that it will fully recover to pre-coronavirus levels, implying a 30% rebound as the crisis ends.
On Monday March 9, the stock market entered a phase of extreme volatility, with two significant sell-offs on Monday and Thursday separated by days of partial recoveries. Overall, there were two distinct trends driving the recent selloff. First, the rising number of coronavirus cases outside of China is raising growing concerns about a global economic slowdown. Second, crude oil prices fell more than 20% after Saudi Arabia increased production.
MSFT’s stock has suffered as countries around the world go into lockdown. As industries shut down production and services, demand for software and web services has also taken a hit, with consumers focusing only on essentials and not discretionary ones. We believe that Microsoft’s fiscal third and fourth quarter results will confirm this reality with declining revenue in many of its segments. That said, the company is also well positioned to benefit from the growing number of people around the world working from home through its software portfolio as well as its services for remote collaboration.
Microsoft’s stock has the potential to recoup its losses over the next few months, but the actual gain and its timing depend on the broader containment of the spread of the coronavirus. Our Dashboard forecast of COVID-19 cases in the United States with comparisons between countries analyzes expected recovery times and possible propagation. If signs of a coronavirus lockdown aren’t clear by the last week of April, when third-quarter results are due, it’s likely that Microsoft shares (as well as the broader market) will fall further. .
Additionally, our -28% coronavirus crash vs 4 historical crashes dashboard creates a complete macro picture. It complements our analyzes of the impact of the coronavirus outbreak on a diverse set of Microsoft’s multinational peers, including Amazon and Salesforce.com. The full set of coronavirus impact and timing analyzes is available here.
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