Wesfarmers Ltd (ASX: WES) shares have climbed substantially over the past three months, but broker Morgan Stanley warns the rally could be overdone.

Where to now for the Wesfarmers share price?

The shares have improved from levels in the low $70 range in April and May to be changing hands for $89.90 now, up a modest 8.16% over the past 12 months.

But Morgan Stanley warns that the re-rating in discretionary spend stocks has “run ahead of fundamentals and is unlikely to prove durable”.

Looking at the consumer sector broadly, the broker has downgraded its industry view to cautious from in-line, “following capital gains tax and negative gearing changes and the expected drag on housing activity, wealth effects, sentiment, and discretionary spending”.

They said that since the announcement of the tax changes, their cautious view had not changed, and they see the risk of derating as high.

Sector-wide, Morgan Stanley said companies were trading at high multiples, not far off 10-year highs.

They added:

Historically, valuation premiums at these levels vs. the market have required either accelerating earnings estimate revisions or a supportive macro backdrop. We see neither today, suggesting that the risk/reward balance has become increasingly unfavourable ahead of reporting season.

The broker has downgraded Wesfarmers to underweight, “following a period of strong share price performance that has pushed the stock’s valuation ahead of the likely earnings trajectory”.

They added:

While we expect Kmart to be a beneficiary of trade-down and range expansion (K home), we expect a moderation vs. consensus expectations in Bunnings’ sales growth, given the emerging correction in domestic property markets. Bunnings remains a high quality business with strong market positioning, attractive returns on capital, and structural opportunities across range, digital, loyalty, and store productivity. However, near-term expectations appear demanding. The emerging correction in domestic property markets is likely to weigh on housing turnover and renovation-related expenditure, particularly in larger-ticket and project-led categories. Maintenance and repair demand should remain comparatively resilient, but we expect softer discretionary spending to result in sales growth below current consensus assumptions.

Kmart, on the other hand, should be a beneficiary of pressure on household budgets, Morgan Stanley said, as consumers seek greater value for money.

They added:

Ongoing range expansion, including K home, provides an additional avenue for category growth and market share gains. Nevertheless, expectations for Kmart are already elevated following several years of strong execution.

What share price to expect

Morgan Stanley slightly increased its price target for Wesfarmers shares, upping it from $78.70 to $79.

The broker is expecting the dividend yield to be 2.7% this year.

The post How much does Morgan Stanley think Wesfarmers shares will fall? appeared first on The Motley Fool Australia.

More reading

• How many Wesfarmers shares do I need to buy for $10,000 of passive income?
• Up 29% since May, can Wesfarmers shares keep surging higher?
• How to build an ASX dividend portfolio that keeps paying you for decades
• Buy, hold, sell: SKS Technologies, Yancoal, Wesfarmers shares
• How much is needed in superannuation to target a $100,000 annual passive income?

Motley Fool contributor Cameron England has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Santos Ltd (ASX: STO) share price is pushing higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $7.85. In early morning trade on Thursday, shares are swapping hands for $7.94 apiece, up 1.1%.

For some context, the ASX 200 is up 1% at this same time.

The Santos share price should be catching some tailwinds today from another overnight rise in the oil price.

Amid ongoing fighting in and around Iran and new Yemeni Houthi attacks on oil tankers in the Red Sea, the Brent crude oil price is up 3.4% overnight to US$94.07 per barrel, according to Bloomberg data. That now sees the oil price up more than 31% since the beginning of July.

Here’s what else investors are mulling over today.

Santos share price stalls on cash flow stumble

Before market open this morning, Santos released its June quarter update (Q2 FY 2026).

The Santos share price is on the rise, with the company reporting a 6% quarter-on-quarter increase in sales revenue to $1.35 billion.

The revenue boost was fuelled in part by a 3% increase in Q2 production, which came out at 23.1 million barrels of oil equivalent (mmboe). That brings Santos’ H1 production to 45.6 mmboe.

And with management forecasting a 20% to 30% boost in H2 production levels, Santos narrowed its full-year FY 2026 production guidance to the range of 99 mmboe to 105 mmboe.

Santos also enjoyed a 4.9% quarter-on-quarter rise in its average realised LNG pricing, which increased to $11.21 per mmBtu.

However, investors look to have some concerns over the company’s cash flow.

Impacted by “challenges” during the final stages of commissioning and ramp up at the Barossa and Pikka projects, and the timing of cargo movements, free cash flow from operations in the first half of FY 2025 was lower than expected at $378 million.

Barossa and Pikka together recorded a combined free cash flow from operations loss of around $151 million for the first half.

The company said that higher realised LNG pricing, along with the expected production uplift, should improve free cash flow in the second half of 2026.

What did management say?

Commenting on the results that could be holding the Santos share price back from larger gains today, managing director Kevin Gallagher said:

Production increased towards the end of the second quarter as Barossa ramped up and Pikka came online, with Barossa now producing at 97% of planned rates. The challenges encountered during commissioning activities have essentially delayed our transition to a higher production, higher cash flow generating portfolio, until the second half of the year…

Gallagher added:

2026 was always going to be a transition year for Santos with two major development projects coming online and significant commissioning activities to be completed before establishing steady-state performance at both assets.

And for passive income investors awaiting the upcoming Santos dividend, Gallagher noted:

The board will consider the timing of expected cash flow over the full year in determining the amount of the interim dividend, with first-half free cash flow impacted by a number of timing items that are not reflective of the company’s underlying cash flow capacity.

The post Why is the Santos share price lifting off on Thursday? appeared first on The Motley Fool Australia.

More reading

• Santos reports higher Q2 revenue as Barossa, Pikka ramp up
• 5 things to watch on the ASX 200 on Thursday
• The Santos share price is in the spotlight this week. Here’s why
• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Tuesday

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.

The Generation Development Group Ltd (ASX: GDG) share price is in focus after the company reported Group funds under management (FUM) of $46.4 billion at 30 June 2026, up 36% on the prior year, and record quarterly sales inflows at Generation Life.

What did Generation Development Group report?

• Group FUM rose 36% year on year to $46.4 billion as of 30 June 2026
• Generation Life’s FUM increased 35% to $5.95 billion, with record quarterly sales inflows of $442 million (up 39%)
• Evidentia’s FUM was $40.5 billion, up 37% on the previous year
• Lonsec researched over 2,000 products, up 9% year on year
• iRate subscribers increased 13% to 5,629

What else do investors need to know?

Generation Development Group finished FY26 by fully integrating the Evidentia and Lonsec managed account businesses, aiming for a more scalable and diversified wealth platform. Generation Life secured a major strategic alliance with Colonial First State (CFS), confirming its role as a key player in Australia’s retirement solutions sector.

Evidentia reported strong net inflows of $3.5 billion for the quarter, helped by a successful transition of $1.8 billion in FUM from Xplore Wealth. The group highlighted favourable structural trends like an ageing population and policy shifts that support demand for their investment and retirement products.

What did Generation Development Group management say?

Group Chief Executive Officer Grant Hackett OAM said:

With the integration of Evidentia and Lonsec managed accounts, we’ve created a stronger, more resilient platform for future growth. Our focus on disciplined execution and investing in our people ensure we’re well placed to deliver attractive shareholder returns.

What’s next for Generation Development Group?

Looking forward, the Group says demographic changes and upcoming tax reforms are creating new opportunities for its retirement income and investment bond products. The strategic partnership with CFS positions Generation Life for further expansion.

Management flagged a robust pipeline across all businesses for FY27, driven by both organic growth and new strategic partnerships. Ongoing investment in technology and capabilities is expected to support sustainable growth over the long term.

Generation Development Group share price snapshot

Over the past 12 months, Generation Development Group shares have declined 22%, trailing the S&P/ASX 200 Index (ASX: XJO), which has risen 1% over the same period.

View Original Announcement

The post Generation Development Group posts 36% lift in FUM and record inflows for FY26 appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Laura Stewart 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 Generation Development Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.