State Street Stock Has A 45% Upside To Its Pre-Inflation Shock

State Street stock (NYSE: STT) currently trades at $72 per share, around 31% below (45% upside) its level of $104 on January 15, 2022 (pre-inflation shock high), and seems like a good investment opportunity. State Street saw its stock trading at around $62 at the end of June 2022, just before the Fed started increasing rates, and is trading 16% above that level. In comparison, the S&P 500 gained about 19% during this period. Further, the stock price has suffered over the last five months due to the fear of a financial slowdown and tough macroeconomic conditions. This was despite a drop in the inflation rate in response to the Fed’s aggressive rate hike plan and positive growth in State Street’s revenues.

Returning to the pre-inflation shock level means that STT stock will have to gain around 45% from the current levels. However, we do not expect that to materialize any time soon, and estimate State Street’s valuation to be around $77 per share. This is because the company’s revenues growth rate is in low single-digits (3% y-o-y in the first half of 2023) due to a drop in total fee income. In addition, the difficult macroeconomic conditions have negatively impacted investor confidence, and made them concerned about a potential recession.