ASX shares have been under a lot of pressure over the past couple of months, as renewed inflation woes and panicking investors weigh heavily on the market.
And it made me question: Does a share price decline always signal trouble ahead? Or do investors sometimes overlook a company’s true value?
I decided to look at the bear case for three ASX shares, and I think the market is getting it wrong.
Here’s why.
Netwealth Group Ltd (ASX: NWL)
The bear case
Netwealth posted an impressive FY26 result in August, including a 20.6% increase in total income and a 18% increase in EBITDA.
But despite a solid result, the share price has continued falling. At the time of writing, the shares have dropped around 27% since the company’s results announcement. They’re down 37% for the year-to-date.
The ASX financial shares have caught up in a board-based sell-off across the financial sector over the past couple of months, driven by inflation concerns and higher interest rates.
Some investors seem to be disappointed by the company’s softer-than-expected platform growth. These are also concerns about margin pressure, and questions about whether its valuation has run too far ahead.
Some more company-specific news hasn’t helped confidence either.
Last week, Netwealth trimmed its full-year funds under administration (FUA) target to $17 billion to $19 billion, down from $18 billion to $20 billion previously. Management said the revision is due to elevated market volatility and extended client decision-making timelines among financial advisers.
Elsewhere, Netwealth announced last month that two of its subsidiaries have been served a class action over its failed First Guardian Master Fund.
Again, investors are spooked and many appear to be continuing to offload their shares.
But is the share price downturn justified? Is the bear case already priced in?
My view on the ASX shares
I think investors are too focused on the company’s near-term figures when they should be focused on longer term growth.
Yes, Netwealth downgraded its FY27 guidance, but the company has already flagged that there is no structural deterioration in its competitive position.
It’s also worth pointing out that the updated range still sits above market expectations. For example, brokers at UBS expect Netwealth’s FUA to come in at around $16.3 billion for FY27.
Regarding the latest class action news, Netwealth previously paid around $101 million in compensation to affected members and has already addressed the issue with ASIC. The compensation program was completed in January 2026 and Netwealth has confirmed it intends to defend the class action.
I think the selloff has been overdone, and the bear case has already been priced into the current share price.
The bear case
Life360 shares have been smashed lower by an overall investor rotation away from high growth tech stocks, persistent inflation, interest rate fears, and a deterioration in investor confidence.
The ASX shares have fallen around 33% since the company posted its second-quarter FY26 update, and are down 39% for the year-to-date, at the time of writing.
It looks like investors have struggled to digest the latest update, which included a 38% increase in revenue and a 53% hike in EBITDA. It also said it expects FY26 revenue growth to accelerate from 33% to 40% year-on-year.
The result was solid, but it wasn’t enough to impress investors, who expected another upward revision in full-year guidance.
Some claim that the lack of guidance upgrade against a background of strong results suggests the company could be plateauing.
And there are also questions about whether the company can actually turn its large user base into a sustainable and reliable revenue going forward.
Again I asked, is the share price downturn justified? And is the bear case already priced in for Life360 shares?
My view on the ASX shares
I think the market is far too pessimistic on Life360 shares, and expectations of a guidance upgrade were overdone.
Life360 has a dominant market position as a global location-services provider. The company recently announced that its monthly active users reached just over 102 million in the second quarter of FY26. That’s a 16% year-on-year increase.
The business is based on a subscription model, which means it is able to drive rapid revenue from a recurring income. And it is also expanding into hardware products to create other ways of driving revenue growth, such as Tile and Pet GPS.
The company is clearly pushing forward with growth, and it has a great trajectory ahead. I think the share price decline is the result of fickle sentiment rather than any legitimate long-term concerns.
I think there are plenty of growth opportunities ahead for Life360 and its shares. It looks like the bear case is more focused on pushing an already depressed share price even lower, rather than the company’s true value.
The bear case
The ASX shares have fallen around 34% over the past two months, and they’re are down 26% for the year-to-date.
Investors are mostly concerned about the company’s heavy capital expenditure, and the risk associated with turning its spending into revenue.
NextDC is currently executing a huge multi-billion dollar expansion plan, with a focus on scaling AI-ready infrastructure across Sydney, Melrbourne, Perth and Kuala Lumpur.
For FY26, the company’s $3.4 billion capex for the year was $397 million above the top end of its guidance. This reflects land acquisitions and accelerated construction to meet customer delivery dates.
The heavy upfront capital expenditure means the company is reliant on continuous debt or equity funding.
It also means that the company is affected by high interest rates or tighter credit conditions. These two things can can hike the costs of construction at its data centres.
Investors are understandably wary that the plan comes at a huge risk, and there are questions about whether it can pull it off at the scale it plans.
My view on the ASX shares
NextDC operates data centres in Australia, New Zealand, and Southeast Asia. The company builds and operates secure facilities where businesses can house their servers and IT equipment.
Development and expansion of its physical centres, cooling, power, security services, and project support come at a high cost.
But data usage is widely expected to explode, driven by artificial intelligence (AI) workloads, cloud computing, and digital transformation. And that means demand for NextDC’s secure, high-quality data centres will also likely experience a huge surge in demand.
In my view, the company is investing well to position itself for when the AI boom happens. And I think investors are underestimating what that could be worth.
The post I looked at the bear case for these 3 ASX shares, and came to a different conclusion. Here's why appeared first on The Motley Fool Australia.
Wondering where to invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now…
See the 5 Stocks
* Returns as of 6 March 2025
More reading
Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360 and Netwealth Group. The Motley Fool Australia has positions in and has recommended Life360 and Netwealth Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
