HSBC shares are down 34% YTD. Should I invest?

Written by: Stanko Iliev
November 24, 2020
  • HSBC reported a better-than-expected Q3 results this October
  • The management will consider whether to pay a dividend based on Q4 results
  • HSBC continues to expand its business and the bank announced its partnership with Mastercard

HSBC shares have advanced from $21.3 above $26.7 since the beginning of November and the current price stands around $26.6. HSBC shares could be a good long-term investment and the technical picture implies that the price may advance even more.

Fundamental analysis: HSBC is a stable bank with a good position on the market

HSBC Holdings plc is a British multinational investment bank and the 6th largest bank in the world by total assets. With more than 3,900 offices in 65 countries, this bank serves around 38 million customers. Europe is facing plenty of challenges including the Covid-19 pandemic and economic headwinds but the European banks are still cheap compare to the US banks.

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The next several months will not be easy for the banking industry but HSBC shares could be a good long-term investment with a generous yield and solid growth prospects. HSBC reported better-than-expected Q3 results this October, total revenue has decreased -9.6% Y/Y while Q3 GAAP EPS was $0.07 which is very good.

HSBC expects further net interest income headwinds in Q4 but based on  Q4 results and 2021 forecast, the management of the bank will consider whether to pay a conservative dividend for 2020. The European Central Bank urged banks to pause dividends until January 2021 but HSBC will probably resume dividend payments as soon as the regulator opens the possibility.

HSBC continues to expand its business and the bank announced its partnership with Mastercard this summer. The partnership will focus on how to accelerate sustainable urban development and build more resilient communities.

“This is about doing what we can right now to set people up for success in the long run. When cities are built to help people thrive, the world thrives,” said Ajay Banga, CEO at Mastercard.

If we compare the total stockholders’ equity of $200B and the current market capitalization of $104.32B we can conclude that this bank is not overvalued. Price/Book value is less than 0.65 which also makes HSBC shares attractive for long-term investors.

If you decide to invest in HSBC shares you should have in mind that the price could also fall again below $20 but this stock offers you less risk compared to some US banks.

Technical analysis: The current uptrend remains intact

HSBC shares did not perform well in the period from January – October of 2020 year but since then, the price of the stock is advancing.

Data source: tradingview.com

The important support levels are $24 and $22, $28 and $30 represent the resistance levels. If the price jumps above $28 it would be a “buy” signal but if the price falls below $22 it would be a strong “sell” signal and the next target could be around $20.

Summary

HSBC shares have been moving in an uptrend since the beginning of November and for now, there is no risk of the trend reversal. HSBC is expanding its business and the bank announced its partnership with Mastercard this summer. HSBC reported better-than-expected Q3 results this October but the management of the bank will consider whether to pay a conservative dividend for 2020. If you decide to invest in HSBC shares you should have in mind that the price could also fall again below $20 but this stock offers you less risk compared to some US banks.