On Monday, Baxter fell by 3% after the stock declined to sell from neutral by Goldman Sachs. On the contrary, Amit Hazzan, the analyst, reacted to investors, lowering the price from $88 to $77.
He shared his opinion by saying that all other macro factors have been reinforced while a US covid recovery is developing leads in headwinds from the MedTech sector. He also said that the company is more vulnerable to macro headwinds than its peers.
“We continue to see pockets of concern for the base business, which further reduces the probability of top-line upside,” stated the analyst Hazzan.
The drastic decline is drenching the investors. The shares have fallen 11.61% in 2022. According to Goldman Sachs, Baxter International is more exposed to risks than other healthcare companies. Plenty of visible reasons state that the returns will be tough to come by in the succeeding years.
Over the last weekend, Goldman gave a brief to investors about the best and worst-case scenarios for stocks. According to him, even the half-full glass symbolizes a terrible scenario.
David J. Kostin, the Chief US Equity Lead of the Goldman team, reinforces it and sees the benchmark S&P 500 closing at 4,700 at year-end. That indirectly implies that the stock rose only a further 4% this year. As the S&P closed out 2021 at 4,766.18, a 4,700 control would be a little shocking to the investors. This could be Goldman’s best case.
The worst-case scenario
The investment bank assures equities could plunge a further 21% to finish 2022 at 3,600. That would be proclaimed as Goldman’s “recession scenario.”
Nowadays, the R-word was getting tossed around Wall Street repeatedly after a slight uncommon occurrence last week. The concerns of the investors elevated the strength of the economy in the years to come due to the uncommon occurrence- the yields on the two-year and 10-year treasuries inverted.
Moreover, Goldman predicts the 2S10S invasion will intensify across the year. Goldman concluded that this puts the odds of a US recession at a 38% probability within the next 24 months.
Ironically, the predicted inversion doesn’t typically sink stock portfolios. But high inflation plus an inversion could be a threat, forcing them into bear territory. A similar situation in the 1970s witnessed an inversion coinciding with stagflation conditions like this.
“The 2s10s yield curve inverted in 1973, a more comparable period of high inflation [to today],” Kostin writes. “The S&P 500 return was negative during the subsequent three, six, and 12 months [back then in the 1970s], and ultimately entered a bear market, falling by 48% in nominal terms and 57% in real terms.”
Taking into count, we can conclude that the worst scenario of a 21% drop would feel as if investors had escaped to death. While as the best scenario, a 4% gain is like bliss to them.
According to Goldman Sachs, the portfolio will flatten this year unless and until the investors are lucky.
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