Here’s Why Foot Locker’s Stock Could Rebound 40% Post COVID-19

Comparing the trend in Foot Locker‘s (NYSE: FL) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 40% once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Foot Locker’s performance against the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Foot Locker’s Stock Fare Compared With S&P 500?

Between February 19th and April 24th, Foot Locker stock has lost 43% of its value (vs. about a 17% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

Foot Locker’s Stock Has Fallen Considerably Because The Situation On The Ground Has Changed

Consumers under lockdown-style conditions could likely forego apparel and other discretionary items and focus on buying necessities such as food and medicine. The coronavirus outbreak has forced nonessential retail stores to close across the globe. In fact, Foot Locker announced on March 17 that it would temporarily close all of its stores around the world with the exception of a few markets in Asia. It should be noted that the company makes around 85% of its sales through physical stores.

We believe Foot Locker’s Q1 May results will confirm this reality with a drop in its total revenues. If signs of coronavirus containment aren’t clear by its August Q2 earnings timeframe, it’s likely Foot Locker’s stock is going to see a continued drop when results confirm palpable reality.

Foot Locker’s Stock Witnessed Something Similar During The 2008 Downturn

We see FL stock declined from levels of around $10 in October 2007 (the pre-crisis peak) to roughly $6 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 41% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.

However, FL stock recovered post the 2008 crisis, to levels of about $9 in early 2010, rising by 40% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will FL’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that Foot Locker’s stock has fallen by 43% this time around compared to the 41% decline during the 2008 recession, we believe it can potentially recover by 40% to levels of near $31 once economic conditions begin to show signs of improving. This marks a partial recovery back to the $39 level FL stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a more complete macro picture and complements our analyses of Coronavirus impact on a diverse set of FL’s peers – such as competitor Nike . The complete set of coronavirus impact and timing analyses is available here.

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