The HSBC (LSE: HSBA) share price had a bad day yesterday. It was down by 6% as investors are clearly nervous about what challenges the new coronavirus variant could bring. It is just one among the long list of cyclical stocks that have weakened substantially more than the FTSE 100 index on this development.
HSBC’s poor November
But HSBC’s case is a bit distinct I imagine. The stock has not had much of a month either. It is down by around 7% since the end of October. And this is in sharp contrast with the fact that the FTSE 100 index has actually had a pretty good month, up until Friday, that is. The index was back to its pre-pandemic levels and sustained them as well. My point here is that there is clearly something going on with the HSBC share price that has held it back this month.
So, what is going on with the HSBC share price?
Profit-taking likely pulled down FTSE 100 stock
The drop follows a great October for the stock, which ended with the company with releasing a robust set of results. This sent its share price to the highest levels since May this year. I reckon November has been a month of profit-taking, for lack of any developments for the company that indicate that its share price should fall. And for exactly this reason I think it could rise more, and soon.
There are plenty of reasons for me to be bullish on this global banking and financial services corporation. For one, even though it has recovered somewhat in 2021 so far, its share price is still way below pre-pandemic levels. That in itself is a sign for me that it could rise further, especially if the stock markets regain their stride again and other FTSE 100 stocks look forbiddingly expensive by comparison.
Also, its valuations indicate that there is room for its stock price to rise. Its price-to-earnings (P/E) ratio is at a relatively low 10.2 times as well. The average FTSE 100 P/E is double these levels, which puts it into perspective. According to my estimates, the HSBC share price could about double from the current levels.
Best dividend yield among peers
Moreover, HSBC pays a dividend too. It has a dividend yield of 3.6%, which is the highest among all FTSE 100 banks. I expect that if its financials remain firm, the bank’s dividends could increase as well, as we have seen to be the case among a number FTSE 100 companies in the past year. A yield above 4% would make it more attractive, since that is the going inflation rate.
I am looking forward to seeing developments in the HSBC share price trend. There could be some hiccups because of the new coronavirus variants, if not an outright plunge in share price. But going purely by its fundamentals at present, I am bullish on the HSBC stock. In fact, based on these it is one of my top picks for 2022. I could buy it now.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.