Challenger share price slides as top broker calls Thursday’s gains ‘surprising’

a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.

The Challenger Ltd (ASX: CGF) share price finished Friday’s session in the red, down 5.2% to $7.11.

This comes after a significant share price gain on Thursday following the release of the company’s latest quarterly results. ASX investors appeared very enthused by the numbers and bid the Challenger share price up by 9.49% to $7.50.

But today, broker UBS said it found the share market’s reaction “surprising”.

Challenger reported a 10% increase in life insurance sales, worth $2.7 billion, for the third quarter of FY22. As well, it reported life book growth of $500 million, up 2.8% for the quarter.

The financial services company also reiterated its FY22 guidance of normalised net profit before tax towards the upper end of the $430 million to $480 million range.

In response to the quarterly report, UBS raised its price target for Challenger shares from $6.40 to $7.30. However, it noted that analyst consensus was already at the upper end of the range at $470 million — so maybe investors got a little carried away on Thursday?

What did UBS say?

According to reporting in The Australian, UBS sent its clients a note saying: “While the tightening profit range ‘de-risks’ FY22 earnings into the August result and ‘removes perceived risk of a management reset’ under new chief executive Nick Hamilton, consensus net profit was already at the upper-end of the range ($470m). So we find the strong stock price reaction surprising.”

UBS said net outflows of $1.7 billion, excluding the impact of the Whitehelm sale, were well behind its forecast and “represents sequential quarter-on-quarter decline even after adjusting for lumpy mandates”.

Further, UBS reportedly said: “We expect fixed income outflows will persist, with global equities flows likely to perform better than domestic equities going forward.”

Yesterday, Hamilton commented on the quarterly results: “As we look to the future, we are well placed to continue our growth trajectory, meet the needs of more customers, and deliver on our purpose to provide financial security for a better retirement.”

The post Challenger share price slides as top broker calls Thursday’s gains ‘surprising’ appeared first on The Motley Fool Australia.

Should you invest $1,000 in Challenger right now?

Before you consider Challenger, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Challenger wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Challenger Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/agmoxlE

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s