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State Street stock gains momentum as earnings growth continues

Writer's picture: Chris Chris


State Street (STT) is a large financial services company that provides its services to institutional and retail investors. It is one of the large custodian bank that houses over $46.8 trillion of capital for its clients, who include central banks, insurance companies, endowments, and asset managers. 


The company also runs an asset management business with $4.7 trillion in assets under management. Its best-known service is the SPDR S&P 500 ETF, which has almost $600 billion in assets. 


State Street operates its business through its two segments: investment servicing and investment servicing. Its custody business includes services like record keeping, client reporting, and custody solutions. 


State Street has a market cap of over $27 billion and has done well over the years. Its stock has jumped by 33% in the last twelve months. However, its ten-year performance of 27% has been weaker than other companies in the industry. 


The stock was trading at $91.4, while the HypeIndex metric rose to 191%. 


State Street HypeIndex
State Street HypeIndex

Positive hype


  • State Street’s business has done well in the past few years, helped by high interest rates by the Federal Reserve. Its total interest income jumped from $3.9 billion in 2019 to over $11.56 billion in the trailing twelve months (TTM). Its total revenue, however, remained stagnant below $12 billion.


  • State Street published strong financial results last week as its revenue rose by 21% to $3.3 billion. Most of this revenue was attributed to interest rates, which pushed its net interest income by 16%.


  • The bank’s assets under custody jumped from $41 trillion in December last year to over $46.8 trillion in the last quarter.


  • The company has continued to return funds to its shareholders. It returned $674 million to shareholders through dividends and buybacks. These share buybacks have reduced its outstanding shares from 367 million in 2022 to 294 million.


  • State Street is seen as an undervalued company since it trades at a price-to-earnings ratio of 11.2, lower than the sector median of 12.36. Its price-to-book ratio of 1.18, lower than the sector median of 1.29.


  • State Street’s stock was trading at $91.43, much lower than the analysts estimate of $98.50. 


  • It is also seen as a good income company since it yields 3.3%. Its preferred shares have a yield of 6.7%.


  • Analysts expect that its revenue will grow to over $3.27 billion in the fourth quarter and to $12.87 billion. 


Negative hype


  • State Street’s net interest margin will likely be affected by the upcoming interest rate cuts.


  • Its revenue growth has been relatively stagnant in the past few years even as its peers have done well. 


  • State Street’s ETF business is facing a big challenge because of its higher fees. For example, the SPDR S&P 500 ETF has had over $4.7 billion in outflows because of its 0.09% fees. In the same period, the cheaper Vanguard S&P 500 (VOO) has added over $79 billion, while the iShares Core S&P 500 (IVV) has added $51 billion. 


  • Its other ETFs are also not doing well because of their higher fees. For example, the SPDR Gold Trust (GLD) has an expense ratio of 0.40%, higher than the iShares Gold Trust’s (IAU) 0.25%. 

State Street stock analysis


State Street stock
State Street stock

State Street is one of the top blue-chip companies in the industry. It has risen from a low of $36 in 2020 to $91. 


On the weekly chart, we see that the stock has risen above the key resistance point at $89, its highest point in February 2023. 


It formed a golden cross pattern as the 50-week and 200-week Exponential Moving Averages (EMA). In most periods, this pattern is one of the most bullish signs.


The MACD indicator has continued rising and is nearing the highest point since March 2023. Also, the Money Flow Index (MFI) have continued rising and is nearing the overbought point. 


Therefore, State Street stock will likely continue rising as bulls target the next point at $100. This view will be confirmed if it moves above the key resistance point at $95.15, its highest level in January 2022.


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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.

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