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Bear of the Day


If you’ve read some of my other pieces you’d see that it’s been a long while since I’ve been bullish on European banks. For me, there’s just too much going on over there with BASAL regulatory requirements and contingent convertible securities (also known as CoCos). If you haven’t heard of CoCos, you should check out my Trending Stocks video on it, “European Banks are in Love with the CoCo.”

In my opinion, the recent Brexit vote has only put more stress on European Banks. So it should come as no surprise that these recent events have done little to sway my opinion of them. Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) HSBC Holdings (HSBC - Analyst Report) . HSBC Holdings is one of the largest banking and financial services organizations in the world and is headquartered at Ground Zero for Brexit, London, England.

Recent earnings estimate revisions for HSBC have been to the downside. Two analysts have dropped their earnings estimates for the current year over the last sixty days. The bearish sentiment has lowered our Zacks Consensus Estimates from $3.60 to $3.13 for the current year. A single analyst has also dropped their estimate for next year, lowering the Zacks Consensus Estimate from $3.44 to $3.21 for next year.

It’s been a tough ride for shares of HSBC over the course of the last several months. The stock was trading in the high $40s ahead of the August 2015 market selloff that sent major market indexes tumbling to lows. Since then the stock’s price has struggled to recover, bouncing between $29 and $34 for the last several months. Friday’s selloff took shares down over 9% to $30.68.

With the Brexit presenting itself as a major headwind for UK banks, I don’t think that diving into HSBC is the best play right now. Especially if the stock manages to break below $29. From there the support doesn’t show up until you look at March 2009 lows. That’s a disastrous scenario for shares of HSBC.

Investors looking for other ways to make money in the same industry should look at Zacks Rank #1 (Strong Buy) stocks Canadian Imperial Bank (CM - Snapshot Report) and Royal Bank of Canada (RY - Snapshot Report) .

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