Since President Trump was released from the hospital, following his bout with the coronavirus, the headlines have turned towards the possibility of a new economic stimulus package. On both sides of the aisle, there’s a perception that the public needs this – support for unemployment benefits, support for small businesses, more cash injected into the system – as a new wave of COVID cases starts ramping up.
The stumbling block is partisan politics. House Democrats put together a $2.2 trillion proposal, but it was loaded down with the traditional Congressional pork: plenty of funds for majority party pet projects, that would not likely get funded otherwise. Trump, with support from Congressional Republicans, refused to accept it. The Democrats refused to back down. Both sides are now refusing to negotiate. The media wisdom is, this is a political defeat for the President in the run-up to the election.
But, however the political optics work out, the economy may survive without this life support, according to equity strategist Mike Wilson of Morgan Stanley.
“I don’t think we need stimulus in the next 30 days for the economy to stay afloat. There is no risk of a double dip recession in the next 30 days if we don’t get the stimulus done,” Wilson wrote.
In the longer run, Wilson is optimistic that a stimulus package will happen. He notes that it is in the interests of both political parties to pass it, and adds, “We still think stimulus is coming. It is now just a timing question before or after the election. Our best guess is probably after the election.”
Following Wilson’s lead, Morgan Stanley analysts are pounding the table on two stocks that look especially compelling. According to these analysts, each name is poised to surge at least 40% over the 12
Coty’s stock (NYSE: COTY), while down more than 70% this year, moved up nearly 13.2% over the last 5 days, outperforming the S&P 500. While this might sound exciting, the chances are that the uptrend isn’t going to last. How do we know this? We look at past stock patterns as well as Coty’s underlying financial growth to arrive at this conclusion. Our AI engine analyzes historical price movement to predict near term behavior for a given level of movement in the recent period, and suggests nearly a 30% probability of Coty Inc. dropping -10% over the next 21 trading days. Compared to this, the chances of it rising by 10% during the same time frame are 15%, suggesting that Coty is 2X more likely to fall than it is likely to rise. If we look at the next 3 months, the chances of a -10% decline jump to a significant 50%. Our detailed dashboard highlights the chances of Coty Inc.’ stock rising or falling and should help you understand near-term return probabilities for different levels of movements.
In addition, the underlying fundamentals support our assessment that Coty’s upward momentum is unlikely to continue for long. Our dashboard Big Movers: Coty Inc. Moved 13.2% – What Next? lays this out.
Let’s take a look at how Coty’s stock has moved. The company’s stock price decreased -76% this year, from $11.13 to $2.65, before moving 13.2% last week, and ending at $3.00. This means that at the beginning of this year, Coty Inc.’s trailing 12 month P/S ratio was 1.33. This figure decreased -67% to 0.43, before ending at