Corporate gaffes and missteps, sadly, have become commonplace. Ergo, while the recent hack of credit bureau Equifax Inc. (NYSE:EFX) was alarming, it wasn’t exactly surprising. Consumers and corporations have largely come to expect them, and have even become numb to them. For perspective, though EFX stock tanked to the tune of 35% in the wake of the successful cyberattack that exposed the personal data of millions of people, most of the potentially-impacted people didn’t bother to freeze their credit despite the risk of not doing so. There doesn’t seem to be much point.
It’s this same passive stance that’s prompted encouragement to buy into an Equifax stock stake, while the price of EFX stock is suppressed. Once the hack is nothing more than a fading memory, it’ll be back to business as usual thanks to a forgive-and-forget mindset. Before you heed the bottom-fishing advice about EFX stock though, you might want to think again.
Equifax Is in Good Company
On the off-chance you just got back from a mission to Mars, in early September credit bureau Equifax announced personal, digitally-stored data of 143 million people had been nefariously accessed, including the nabbing of 200,000 credit card numbers.
Were it a different time, the response from consumers and investors might be different than the one festering now.
For instance, News Corp (NASDAQ:NWSA) worked past its all-advised purchase of MySpace in 2005, only to be lapped by Facebook Inc (NASDAQ:FB). The Tylenol brand, owned by Johnson & Johnson (NYSE:JNJ), eventually got past its 1982 black eye after cyanide-laced painkillers that claimed the lives of seven people. The Coca-Cola Co (NYSE:KO) was forgiven for 1985’s “New Coke” debacle, just as soon as it brought the old Coca-Cola flavor back.
Times have changed though. Consumers as well as corporations aren’t nearly as quick for forgive and forget as they’ve been in the past and that bodes poorly for EFX stock.
As evidence of this idea one only has to look at Chipotle Mexican Grill, Inc. (NYSE:CMG). Though patrons were willing to let go of its previous food-poisoning gaffes, the one that materialized in December of 2015 has for some reason stuck in consumers’ minds. Though we’re now nearly two years removed from the incident, it’s still holding the company back. While last quarter’s top line was up 17% year-over-year, revenue is still nowhere near what it was prior to the 2015 e Coli outbreak Chipotle sparked. It should have seen a better recovery by now, if one was in the cards.
Abercrombie & Fitch Co. (NYSE:ANF) suffered a similar headwind in late 2014 when a 2006 interview with now-former CEO Michael Jeffries surfaced. In simplest terms, Jeffries effectively told kids who weren’t skinny, popular and good looking they weren’t invited to shop at Abercrombie stores.
It’s an exclusiveness shtick that might have played in the 80’s and 90’s. In today’s more inclusive and politically correct environment though, it was outrageous, hastening the demise of Abercrombie & Fitch by accelerating the already-existing deterioration of its sales.
And don’t think for a minute that consumers will ever really trust Wells Fargo & Co (NYSE:WFC) again after it opened an unauthorized 3.5 million accounts so its bankers would meet sales quotas. Many consumers have flatly conceded they’ll never do business with the bank, and they’re sticking to their word.
Likewise, don’t think for a minute travelers aren’t doing everything they feasibly can to avoid booking a flight with any carrier other than United after the airline forcibly dragged a passenger from a plane it had overbooked (even if alternatives are limited).
So no, don’t be shocked if Equifax doesn’t breeze past this misstep in just a few short months. Consumers and corporations used to move on. Now they don’t—at least not nearly as much as they did—because they don’t have to. They’re not even sure they can afford to forget about past blunders, which seem to be getting increasingly serious. Alienating your customer base with a new flavor of soda is one thing. Exposing your customers’ credit card data is potentially life-ruining.
Bottom Line for EFX Stock
None of this is to suggest Equifax is destined for bankruptcy and EFX stock is headed to zero. Undoubtedly, Equifax will eventually recover, and Equifax stock will see bullishness at some point in the future.
It is to suggest, though, that if you’re going bargain hunting in anticipation of an immediate and sizable rebound, move along. Lenders and consumers alike can tap rival credit bureaus like Experian plc (ADR) (OTCMKTS:EXPGY) and TransUnion (NYSE:TRU), neither of which made the same cybersecurity mistake Equifax just did, and both of which are almost certain to be beefing up their digital security protocols to make sure it doesn’t happen to them.
In the meantime, consumers and corporations aren’t letting these matters go the way they used to. That translates into a long, long road to recovery for Equifax. There’s no need to be in a hurry to buy it.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.