Coronavirus and Stock Markets - Thoughts?

[engineer]

Bloomberg Opinion:

The chart is from Savita Subramanian’s quantitative team at Bank of America Corp. I include it because I had forgotten all about the earnings season that happened only three months ago, and also because I suspect the information that companies are about to give us for the first quarter will be no more useful. We will hear from companies accounting for 18% of the S&P 500’s market value this week. By the end of it we will know more about the effect of the virus on business, but that will probably come from guesses executives make about the future, rather than any cold numbers. As the first quarter straddled a period when the virus went from having no effect on economic activity to snuffing out whole sectors, it will be difficult to tell much.
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Even this probably understates the extent of the damage. Subramanian reports that corporate guidance was “very sparse” in March. Just 33 companies offered guidance, the second-lowest for that month since 2000, while more than 70 officially suspended it, giving the virus as an excuse. Brokers also started to give up on predicting earnings, again citing the virus.

https://www.bloomberg.com/opinion/articles/2020-04-14/coronavirus-netflix-rally-undercuts-hopes-of-v-shaped-recovery-k8zdod4u?srnd=premium-europe

Prof. Damodaran:

@engineer

If you feel drained from having to estimate the 2020 number, I don’t blame you, but the more forward-looking part of this valuation is estimating how your company will fare in the post-virus economy (assuming it does not fail).

@engineer

The post-virus economy will be different from the pre-crisis version: Every major crisis creates changes in business environment, regulations and business models that reshapes the economy and resets competitive games, setting the stage for new winners and losers. Thus, for some companies, the bad news on revenues and earnings this year may be a precursor to superior operating performance in the post-virus economy, as their competition fades

@engineer

If your concept of valuation is downloading last year’s financials for a company into a spread sheet and then using historical growth rates, with some mean reversion thrown in, to forecast future numbers, you are probably feeling lost right now, and with good reason.