Sell alert! Why this expert is calling time on Judo shares

Judo Capital Holdings Ltd (ASX: JDO) shares are slipping today.

Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for 91 cents. In early afternoon trade on Wednesday, shares are swapping hands for 90.7 cents apiece, down 0.3%.

For some context, the ASX 200 is up 0.2% at this same time.

Unfortunately for faithful stockholders, today’s underperformance isn’t a one-off. With today’s intraday move factored in, the challenger bank’s share price is down a painful 49.6% in 2026.

Most of that pain came in a single day. Namely, 25 June, when Judo shares crashed 40.4% after the bank increased its forecast full-year FY 2026 cost of risk estimates and slashed its full-year profit guidance.

And looking ahead, Investor Pulse’s Mark Elzayed believes Judo Bank could continue to struggle (courtesy of The Bull).

Here’s why.

Why Judo shares could face ongoing headwinds

“This Australian lender focuses on small and medium size enterprises,” Elzayed said.

Commenting on the 25 June downgrades that sent the ASX 200 bank stock into a tailspin, Elzayed noted:

Judo recently cut profit before tax guidance in fiscal year 2026 to between $163 million and $169 million from a previous range of between $180 million and $190 million. It was primarily driven by a higher cost of risk now expected to range between $116 million and $122 million following specific provisions against three exposures across different sectors.

And while management is forecasting profit growth for FY 2027, that guidance also left investors wanting.

“Profit before tax guidance of between $210 million and $220 million in full year 2027 was below market expectations of $255.1 million,” Elzayed said.

Summarising his sell recommendation on Judo shares, he concluded, “In our view, market reaction reflects more than a one-off potential earnings downgrade. Provisioning risk remains elevated, so we retain a sell on Judo Capital.”

What did the ASX 200 bank stock’s CEO say about the downgrades?

“While today’s update is partly a result of the macro environment, it is nevertheless disappointing,” CEO Chris Bayliss said on the day Judo shares crashed 40.4%.

“Regardless, we remain confident in the strength of our underlying business and the quality of the portfolio,” he added.

Addressing the root of the profit downgrade, Bayliss said:

We continue to see strong underlying momentum in the business. Recent credit outcomes have been driven by a small number of customers, who we are actively working with. These exposures have deteriorated subsequent to the customer-by-customer review undertaken in the third quarter and reflect recent, borrower-specific developments.

The post Sell alert! Why this expert is calling time on Judo shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.