S&P Global (NYSE:SPGI), together with Moody's (NYSE:MCO), practically owns the credit ratings market as these two have a combined 80% share.
Fitch is a distant third with a market share of 15%. So it is not surprising that both MCO and SPGI stock have been stellar performers since the depth of the 2008-9 Financial crisis.
Alas, no trend lasts forever.
S&P Global recently pulled its guidance for the year as a result of weakness in the debt issuance market. Higher interest rates mean higher borrowing costs, which in turn puts off a lot of prospective borrowers.
This translates into less business for the credit ratings agencies, SPGI included. The stock market apparently anticipated the hard times ahead as SPGI stock has been falling for months.
The share price has tumbled from an all-time high of $484 to under $312 last week. While S&P Global’s long-term future remains bright, investors are still wondering whether this dip is worth buying.
Let’s try and find out with the help of Elliott Wave analysis.
The daily chart of SPGI stock reveals a clear five-wave impulse to the downside. The pattern is labeled 1-2-3-4-5 in wave (a). It means a three-wave recovery in wave (b) can be expected before the bears return in wave (c).
If this count is correct, wave (b) can lift the price to around $400 a share before the bears return. Once wave (c) begins, targets below the $300 mark would make sense.
In fact, we won’t be surprised to see SPGI stock falling to its 2020 lows near $200 like so many other high-flyers did recently. Besides, at a forward P/E ratio around 30, S&P Global is hardly undervalued.
We think that investors who bought in December, 2021, would have to wait a while before breaking even.