After a tumultuous week for WiseTech Global after ongoing revelations about the private life of CEO Richard White, the average broker target only fell by around -3%, while both Citi and Bell Potter upgraded their ratings to Buy from Hold (or equivalent) following action at board level.
As investors began to focus more on the health of the underlying business, the share price bounced back to close Friday at $112 from a low around $98 the day prior. The shares had reached a high of just above $139 at the beginning of the month.
“Given the nature of enterprise software and the difficulty in shifting to a different solution we regard the prospect of any negative impact on the business as minimal”, noted Bell Potter.
This broker felt the WiseTech Global board made “the right move” now the former CEO/founder and director has stepped down from both roles and is becoming a consultant to the company.
While the board and Richard White have reached a solution whereby strategy and governance have been divided, explained Citi, this analyst didn’t see any risk to earnings or the outlook for the company.
For the second week in a row, falls in average earnings forecasts by analysts largely related to stocks in and around the Mining sector (seven of ten downgrades). Unlike last week when falls were largely due to brokers updating commodity sector outlooks, the reasons were many and diverse this time around.
Chrysos, known for its PhotonAssay technology which uses high-energy X-rays to measure gold content in ore samples, is second on the earnings downgrade table after first quarter revenue only slightly missed forecasts by Ord Minnett and Bell Potter. Management maintained FY25 guidance.
Ord Minnett only slightly lowered its FY24 earnings forecast for Meteoric when updating forecasts around the company’s optimised scoping study for its Caldeira project in Brazil, which added in additional high-grade ore from its Figueira lease.
Pilbara Minerals was impacted by Morgans’ September quarter preview of results for lithium miners and marking-to-market of earnings forecasts for a US$850/t spodumene price assumption. Despite this adjustment, the company remains the broker’s top pick in the sector partly due to a strong balance sheet.
Perhaps the most serious earnings downgrade related to 29Metals given the nature of accompanying broker commentary. Gearing on the balance sheet is set to rise to 54% in 2025 from 37% in 2024, prompting analyst at Morgan Stanley to downgrade to Equal weight from Overweight, given rising risk from a forecast for negative cash flow in 2025.
The balance sheet remains a genuine risk, agreed Macquarie. While Citi could see risk to debt covenants, this analyst highlighted management is revisiting senior debt facilities now there is only one operating asset.
From among Industrial stocks, Audinate Group featured atop the earnings downgrade list while Nick Scali was number seven.
Commenting after Audinate’s first quarter results missed expectations, Shaw and Partners highlighted the opaque outlook for a return to growth.
The trading update implied to the analysts the business is tracking below management’s target to achieve slightly lower US$ gross profit growth in FY25. Management now expects the second quarter will match the first and the second half will be modestly stronger than the first though the magnitude remains unclear.
This broker suggested the cash break even in FY24 was only achieved due to unusually positive customer ordering patterns pulling forward demand.
Over at UBS, analysts are maintaining the faith in the group’s longer-term fundamentals but recognise near-term uncertainties need to be worked through after a “soft” first quarter update. It’s felt lower gross profit guidance resulted from ongoing challenges including softer demand, shorter lead times and increased inventory.
Incremental positives, according to UBS, include Dante certification and training programs remaining strong, while new AVIO products and a premium version of Dante Virtual Scorecard will contribute to second half earnings.
While Nick Scali’s gross margins have been impacted by materially higher-than-expected freight rates, such headwinds are not expected to feature permanently.
On the flipside, the leading companies on the earnings upgrade table are Mirvac Group, Bellevue Gold, and Boss Energy.
Citi opened a 30-day short-term positive view on Mirvac given Victorian stamp duty relief and potential sales for the Harbourside project in NSW, but also noted current tailwinds will likely benefit FY26 the most.
In the broker ‘s view, the group’s future sales and residential revenue are supported by last week’s first quarter results showing a 32% year-on-year rise for residential sales and 111 conditional sales in WA and QLD.
While UBS felt consensus expectations are too high for Mirvac, like Citi, the broker anticipated solid growth into FY26 due to a subsiding capitalised interest headwind and the “rolling-off” of low-margin residential projects.
For Bellevue Gold, Ord Minnett highlighted a better-than-expected first quarter result and appreciated the completion of problems with ventilation at the Bellevue Gold project which allows for increased production and mill volume. This broker kept a $1.35 target price and downgraded to Lighten from Hold due to the recently strong share price.
Boss Energy, now the second most shorted stock on the ASX, revealed first quarter sales of 200klbs for $24.3m, which was better-than-anticipated by Bell Potter, while operating cash flow of $9.5m was also deemed a positive.
Shaw and Partners noted the Honeymoon mine ramp-up is proceeding in line with expectations, with no change to management’s FY25 guidance of 850klb of uranium production.
The two largest positive changes to average target price last week were for Insignia Financial and MA Financial, while AIC Mines and Flight Centre Travel received the largest average declines.
New research coverage by Bell Potter on copper exploration and mining company AIC Mines with a Buy rating and 60 cent target dragged down the average target of now three brokers in the FNArena database to 77 cents.
Management has a good track record of asset development (relevant for its 100%- owned Eloise Copper project in WA), highlighted the analyst, with experience in acquisition and organic-based growth.
Flight Centre’s average target fell as challenging economic conditions were weighing upon the Corporate division in the first quarter, explained Ord Minnett.
A negative factor for earnings in both the Corporate and Leisure divisions, explained the broker, is a material decline in airfares which makes some overrides (a portion of the commission earned by the sub-agent) more difficult to achieve.
Insignia Financial’s average target rose following a quarterly business update. Suspending the dividend makes the balance sheet more resilient, in Citi’s view, and additional cost savings will likely be targeted at the November 13 investor day.
Also noting upside potential from cost-cutting initiatives, as well as easing concerns around gearing, UBS raised its price target to $3.10 from $2.30 and upgraded to Neutral from Sell.
MA Financial has momentum going into the second half, observed UBS, following a third quarter operating update. It’s felt the establishment of a $1bn real estate credit vehicle for institutional investors will provide visibility on the FY26 asset management target of $15bn.
Ord Minnett declared “an earnings recovery is well underway”, (consistent with the broker’s prior expectation), despite slightly lower-than-expected net flows in Asset Management.
Asset Management fund inflows (ex-institutional) for the nine months to September 30 were up by 25% on the previous corresponding period, noted Morgans, while third quarter gross flows rose by 11%.
In the good books: upgrades
DATA#3 LIMITED. ((DTL)) was upgraded to Neutral from Sell by UBS. B/H/S: 1/2/0
UBS upgrades Data#3 to Neutral from Sell on the back of a fall of -18% in the stock price since August results with much of the election risk now discounted in the share price.
The analyst reiterates belief in the company as being well run with exposure to structural IT spend which should support an 11% compound average growth rate in EPS from FY25 to FY28.
Some weakness is flagged as possible for FY25 with a risk of budget cuts from the Qld government and risks to Federal Government spending in in late 2025, post-election.
Target price falls -8% to $8. Neutral rated.
EVT LIMITED ((EVT)) was upgraded to Buy from Neutral by Citi. B/H/S: 2/0/0
A lack of transparency from EVT Ltd around property values, earnings volatility and extraneous, uncontrollable events such as Hollywood strikes, are believed to contributing factors to the share price trading at a discount to fair value, according to Citi.
The analyst believes there are signs from management a change is building with a shift to prioritising hotels and moving cinemas to non-core.
The target price is increased to $12.37 from $11.32 with an upgrade to Buy from Neutral. EVT Ltd Chairman indicated at the AGM he would like to see a higher share price, Citi notes.
INSIGNIA FINANCIAL LIMITED ((IFL)) was upgraded to Neutral from Sell by UBS. B/H/S: 0/3/1
Following Insignia Financial’s release of 1Q25 update, UBS highlights the update is showing stabilised Wrap flows following the MLC Expand migration, with a net gain of $522m.
However, the broker highlights a headwind from flagged client transitions, with an expected further -$1.4bn in outflows for FY25. Despite these challenges, the broker sees upside potential from cost-cutting initiatives, as well as easing concerns around gearing.
UBS has upgraded its rating to Neutral from Sell and raised its price target to $3.10 from $2.30. Financial forecasts for FY25-27 have been increased by 7.5%-26%.
JUMBO INTERACTIVE LIMITED ((JIN)) was upgraded to Buy from Neutral by Citi. B/H/S: 4/0/0
With shares trading on a PE multiple -32% below the historical average, Citi raises its target for Jumbo Interactive to $14.70 from $14.25 on increased market multiples and upgrades to Buy from Neutral.
The analysts see limited downside to 1H FY25 results next February even if jackpots stay subdued as consensus expectations were rebased lower post the FY24 result.
The broker also sees upside potential from Daily Winners should management be successful in converting current free users to the $15/mth premium tier.
REECE LIMITED ((REH)) was upgraded to Neutral from Underperform by Macquarie. B/H/S: 0/2/3
Macquarie views Reece’s 1H25 guidance update as “disappointing”, coming in at $300m-$320m, well below the broker’s forecast at $338.6m.
The analyst points to the surprise decline in US dollar denominated sales of -6.5% with weaker repair & remodeling markets and softness in the smaller end of new construction builds.
A&NZ sales were flat in 1Q25 with weaker volumes offset by M&A additions. Macquarie lowers EPS forecasts by -8% and -6% for FY25/FY26, respectively.
The stock is upgraded to Neutral from Underperform with a rise in target price to $24.10 from $22.85 due to higher valuation multiples on lower earnings forecasts. The earnings downgrade is highlighted as a “clearing event” by the broker.
TREASURY WINE ESTATES LIMITED ((TWE)) was upgraded to Buy from Neutral by Citi. B/H/S: 5/1/0
Citi observes September quarter bottled red wine exports by volumes to Asia advanced 210% on the previous quarter, a lift from a rise of 144% in the June quarter.
The broker explains China is the main driver of demand which is a positive for Treasury Wine Estates and viewed as meeting the AGM commentary last week.
Excluding China, bottled red wine exports continued to decline by -3% in the September quarter. Thailand, Taiwan and Vietnam were the softest, down -31%, -25% and -30%, respectively. Hong Kong, Singapore and Malaysia markets grew.
Citi upgrades the stock to Buy from Neutral because of the decline in share price. No change to earnings forecasts. Target price $12.97.
WISETECH GLOBAL LIMITED ((WTC)) was upgraded to Buy from Neutral by Citi and to Buy from Hold by Bell Potter. B/H/S: 4/3/0
While acknowledging governance issues create uncertainty as well as the leadership transition at WiseTech Global, Citi believes the board and Richard White have reached a solution whereby strategy and governance have been divided.
Some near-term negative share price reaction might occur on uncertainty on the transition, but the analyst does not see any risk to earnings and the outlook for the company. Industry freight volumes remain a tailwind also for growth in FY25.
Citi upgrades the stock to Buy from Neutral. Target price is lowered -10% because of reduced longer-term earnings growth forecasts to $124.50.
Bell Potter comments both Richard White and the WiseTech Global board have made “the right move” in the now former CEO and director stepping down from both roles and becoming a consultant to the company.
It’s not a perfect solution but it’s the best of a bad situation, the broker exclaims. Price target is lowered by -7% to $123.75 to account for any negative impacts from the saga, potentially. Upgrade to Buy from Hold. No changes made to forecasts.
Bell Potter: “[…] given the nature of enterprise software and the difficulty in shifting to a different solution we regard the prospect of any negative impact on the business as minimal”.
In the not so good books: downgrades
29METALS LIMITED ((29M)) was downgraded to Equal weight from Overweight by Morgan Stanley. B/H/S: 1/3/0
29Metals reported 3Q2024 results which showed robust zinc production, gold was in line, and annualised year-to-date copper production is above guidance but meeting Morgan Stanley’s expectations.
With gearing on the balance sheet rising to 54% in 2025 from 37% in 2024, the analyst envisages risks rising as the company is forecast to generate negative cash flow in 2025.
Target price 45c.The stock is downgraded to Equal weight from Overweight with the stock trading around the target price Industry view: Attractive.
ARCADIUM LITHIUM PLC ((LTM)) was downgrade to Neutral from Buy by Citi. B/H/S: 0/6/0
Citi downgrades lithium earnings forecasts on the back of a cautious short-term outlook and reduced lithium price expectations. The broker forecasts a balanced market in FY26, post the deferral of planned projects from troubles with financing.
The analyst stresses some de-stocking in the peak Sept-Oct season, but production has started to trend higher, which is likely to increase inventories into year end.
Arcadium Lithium is downgraded to Neutral from Buy with the stock trading near target price. Citi’s estimates highlight the Rio Tinto ((RIO)) bid implies a longer-term lithium price of US$20k/t or US$1699/t spodumene.
Patriot Battery Metals ((PMT)) is the only Buy rating left in the sector but Pilbara Minerals ((PLS)) is the preferred lithium company exposure as the broker believes Pilbara is most exposed to any change in market sentiment such as an EV stimulus.
BELLEVUE GOLD LIMITED ((BGL)) was downgraded to Lighten from Hold by Ord Minnett. B/H/S: 2/0/0
Ord Minnett observes Bellevue Gold reported a better-than-expected 1Q25 result. Notably, the analyst liked the completion of problems with ventilation at the Bellevue Gold project mine which allows for increased production and mill volumes.
The broker lifts EPS estimates by 4% in FY25 and 2% in FY26. Rating downgraded to Lighten from Hold due to the share price appreciation. Target price $1.35.
BLUESCOPE STEEL LIMITED ((BSL)) was downgraded to Neutral from Buy by Citi. B/H/S: 2/1/1
Citi downgrades its rating for BlueScope Steel to Neutral from Buy given US steel price momentum is stalling, and Asian spreads continue to be pressured by high Chinese exports.
Chinese steel consumption is contracting at a faster rate than production, note the analysts thereby boosting net steel exports.
As steel spreads normalise and North Star and Australian domestic volumes lift, the broker points out valuation metrics remain supportive for BlueScope Steel. Citi’s $23 target is kept.
FORTESCUE LIMITED ((FMG)) was downgraded to Sell from Hold by Bell Potter. B/H/S: 2/2/3
Fortescue reported a fall in 1Q25 production of -12% on the previous quarter with shipments lower than Bell Potter’s expectations and costs higher than forecast.
The analyst views the result as “soft”, exemplifying some of the headwinds the company will face in FY25 as cost inflation remains stubborn and production declines despite a lift from Iron Bridge.
Bell Potter lowers EPS forecasts by -19% in FY25 and -10% in FY26 due to lower prices realised and higher cost assumptions. The stock is downgraded to Sell from Hold with a reduced target price of $17.04 from $17.58.
MINERAL RESOURCES LIMITED ((MIN)) was downgraded to Neutral from Buy by Citi. B/H/S: 3/3/1
Citi downgrades lithium earnings forecasts on the back of a cautious short-term outlook and reduced lithium price expectations. The broker forecasts a balance market in FY26, post the deferral of planned projects from troubles with financing.
The analyst stresses some de-stocking in the peak Sept-Oct season, but production has started to trend higher, which is likely to increase inventories into year end.
Mineral Resources is downgraded to Neutral from Buy with the stock trading around the target price.
NETWEALTH GROUP LIMITED ((NWL)) was downgraded to Equal weight from Overweight by Morgan Stanley. B/H/S: 1/6/0
Morgan Stanley raises its target for Netwealth Group to $27.50 from $23.50 and downgrades to Equal weight from Overweight on valuation. The share price has risen by 80% in 2024.
The lower rating in no way diminishes the broker’s regard for the group. In fact, Netwealth is considered one of the best software businesses in Australia. Management’s execution is praised, and structural tailwinds still prevail, note the analysts.
Overweight rating. Industry view: In-Line.
- BARBARA LIMITED ((SBM)) was downgraded to Neutral from Outperform by Macquarie. B/H/S: 0/2/0
An extended shutdown, although planned, led to weak results from St. Barbara in 1Q25. Macquarie highlights production came in below forecasts by -30% and costs at Simberi were above estimates by 22%.
Management has retained FY25 guidance at 65-75koz and all-in-sustaining costs of $3200-$3600/oz. Macquarie expects a considerably stronger 2H25 with EPS estimated to gain 55%.
The stock is downgraded to Neutral from Outperform due to a doubling of the share price over the last three months. Macquarie notes the company’s leverage to the gold spot price but believes risks around funding and permitting remain. Target price rises 48% to 49c due to less assumed shares on issue.
SEEK LIMITED ((SEK)) was downgraded to Accumulate from Buy by Ord Minnett. B/H/S: 5/0/0
Following recent share price strength, Ord Minnett downgrades its rating for Seek to Accumulate from Buy on valuation and maintains the $27 target.
The overall impact of the analyst’s forecast changes is minor. One positive adjustment relates to higher listings growth assumptions by the broker in the Australasian market.
Earnings forecast
Listed below are the companies that have had their forecast current year earnings raised or lowered by the brokers last week. The qualification is that the stock must be covered by at least two brokers. The table shows the previous forecast on an earnings per share basis, the new forecast, and the percentage change.
