Tag: Stock pick

It was another ugly week for shareholders in CSL Ltd (ASX: CSL).

While the share price finally steadied toward the end of the week, the damage had already been done.

CSL shares have crashed 19% over the past five trading days and are now down roughly 44% year to date and a staggering 59% over the past 12 months. For a company once considered one of the ASX’s safest long-term growth machines, that is a brutal fall from grace.

So, what exactly is going on, and could a comeback finally be brewing?

Another downgrade sends investors running

The latest sell-off was sparked by yet another earnings downgrade.

CSL now expects FY26 revenue of US$15.2 billion on a constant currency basis and net profit after tax of around US$3.1 billion. That compares with FY25 revenue of US$15.6 billion and profit of US$3.3 billion.

Investors clearly were not impressed. The market has become increasingly impatient with CSL after several years of slowing growth, operational hiccups, and disappointing updates.

Once upon a time, investors treated CSL shares like royalty.

Now? The market seems to greet every announcement by nervously checking for hidden bad news. The company has battled weaker vaccine demand, restructuring headaches, leadership turnover, and ongoing operational challenges.

At the same time, healthcare stocks more broadly have fallen out of favour throughout 2026, making life even tougher for CSL shareholders.

Why confidence keeps fading

The biggest issue right now appears to be confidence.

For years, investors happily paid premium valuations on CSL shares because the ASX biotech company consistently delivered strong earnings growth and operational execution. That trust has taken a serious hit.

This latest downgrade only reinforced fears that earnings momentum remains under pressure. Management specifically pointed to weakness in China albumin pricing, inventory normalisation in the US immunoglobulin market, and several operational factors weighing on profitability.

Translation? Investors are tired of hearing about temporary problems that somehow keep sticking around. Right now, the market wants proof. Not promises.

That means CSL likely needs to deliver several periods of stabilising revenue growth and improving margins before sentiment meaningfully recovers.

Is the market becoming too pessimistic?

Despite all the negativity, writing off CSL completely may still be dangerous.

This remains Australia’s largest biotechnology company with enormous global scale, powerful plasma collection operations, and leading healthcare products used worldwide.

Importantly, healthcare demand itself has not disappeared. If CSL can regain earnings momentum, investor sentiment could improve surprisingly quickly, especially after such a dramatic valuation reset.

Sometimes the market swings too far in both directions. And after a near-60% collapse over 12 months, some investors are beginning to wonder whether pessimism around CSL shares has become excessive.

What do brokers think?

Broker sentiment still leans cautiously optimistic overall.

Morgans recently retained its buy rating on CSL shares despite trimming its price target to $147.59. That still implies roughly 50% upside from current levels.

The broker acknowledged disappointment around the downgrade but noted the problems appear “primarily executional rather than structural”.

Meanwhile, Bell Potter maintained its hold rating but sharply slashed its target price from $155 to $100. That new valuation sits only modestly above CSL’s current share price of $97.96.

The post CSL shares crash, but is a comeback looming? appeared first on The Motley Fool Australia.

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• Buy, hold, sell: CBA, CSL, and Life360 shares
• How much $500 a month could become with ASX shares
• 5 excellent ASX dividend shares to buy with $50,000
• Where to from here for CSL shares according to Macquarie

Motley Fool contributor Marc Van Dinther 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 CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Elders Ltd (ASX: ELD) share price is in focus after the company reported underlying EBIT of $76.6 million and a fully franked interim dividend of 18 cents per share for the half year to 31 March 2026.

What did Elders report?

• Underlying sales revenue: $1,767.7 million, up 32% year-on-year
• Underlying EBIT: $76.6 million, up 33%
• Statutory profit after tax: $39.5 million, up 17%
• Interim dividend: 18 cents per share, fully franked (unchanged)
• Operating cash flow: $67.0 million, up 115%
• Underlying return on capital: 10.7% (down from 12.6%)

What else do investors need to know?

Elders fully implemented its new divisional model during the half, introducing standalone divisions to improve accountability and efficiency. The company also completed the third wave of its Systems Modernisation program, with the final stage design finished.

A key development was the announced sale of the Killara Feedlot, which is now classified as a discontinued operation. Financial contributions from Killara have been excluded from underlying earnings for both current and prior periods to ensure comparability.

Synergy benefits from the recent Delta Agribusiness acquisition are progressing well, with the bulk of financial gains expected in the latter half of FY26 and beyond. Elders continues to navigate industry challenges, including elevated diesel prices and fertiliser supply disruptions, leveraging its diversified supplier base and procurement strategies.

What’s next for Elders?

Elders expects stronger metrics in the second half as earnings from Delta Agribusiness build and proceeds from the Killara Feedlot sale help reduce net debt and interest expense. Management flagged continued focus on operational improvement through its new divisional structure, the realisation of further Systems Modernisation benefits, and ongoing investment in digital tools such as AI agents.

While diesel costs remain a watchpoint for the cost base, Elders is confident its diversified approach leaves it well-placed to navigate industry challenges and pursue further growth opportunities, particularly as integration of recent acquisitions continues.

Elders share price snapshot

Over the past 12 months, Elders shares have risen 10%, outperforming the S&P/ASX 200 Index (ASX: XJO) which has risen 4% over the same period.

View Original Announcement

The post Elders posts higher HY26 profit and holds interim dividend appeared first on The Motley Fool Australia.

More reading

• Pro Medicus inks $90m contract
• Brambles revises FY26 outlook, announces new US$400m buy-back
• Life360 launches US$225m share repurchase to offset dilution
• ALS reports record FY26 earnings and dividend uplift
• What on earth’s going on with Xero shares?

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 Elders. 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.

The Life360 Inc (ASX: 360) share price is in focus after the company announced a substantial multi-year share repurchase program of up to US$225 million and highlighted ongoing positive operating cash flow.

What did Life360 report?

• Board of Directors has authorised a share buy-back program of up to US$225 million
• Aims to offset dilution from stock-based compensation
• Backed by twelve consecutive quarters of positive operating cash flow
• Strong balance sheet supports the strategic initiative
• Life360 serves approximately 97.8 million monthly active users worldwide as of 31 March 2026

What else do investors need to know?

Life360’s buy-back program is designed to return value to shareholders while preserving flexibility. The company can purchase shares on the open market, in privately negotiated deals, or other lawful means, depending on market conditions.

There’s no obligation to acquire a specific amount and the program may be paused, modified, or ended at any time. Life360’s strong operating cash flow and balance sheet provide it with options, even as it continues to grow its global member base.

What’s next for Life360?

Looking ahead, Life360 says it will maintain its focus on expanding the platform and growing its international user base. The repurchase program adds a layer of capital return for shareholders, even as investment in new services and platform improvements continues.

Management notes the timing and amount of any share buy-backs will depend on market conditions and other priorities, allowing flexibility as the business evolves in coming years.

Life360 share price snapshot

Over the past 12 months, Life360 shares have declined 40%, trailing the S&P/ASX 200 Index (ASX: XJO) which has risen 4% over the same period.

View Original Announcement

The post Life360 launches US$225m share repurchase to offset dilution appeared first on The Motley Fool Australia.

More reading

• Pro Medicus inks $90m contract
• Brambles revises FY26 outlook, announces new US$400m buy-back
• Elders posts higher HY26 profit and holds interim dividend
• ALS reports record FY26 earnings and dividend uplift
• What on earth’s going on with Xero shares?

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 positions in and has recommended Life360. The Motley Fool Australia has positions in and has recommended Life360. 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.

Do you have a spare $5,000 to invest but aren’t sure where to put it? Here are four ASX 200 shares I have my eye on this week, and they’re all tipped to climb higher this year.

Cochlear Ltd (ASX: COH)

Cochlear shares crashed in April after the ASX healthcare company downgraded its FY26 earnings guidance, citing weaker conditions across developed markets and softer demand. At the time of writing, the shares have climbed 1% since reaching a multi-year low. There is a long way for the stock to recover back to pre-crash levels but I think there is potential for a rebound. The guidance downgrade followed the ASX 200 company’s softer-than-expected half-year result earlier this year, and a sector-wide rotation away from ASX healthcare shares. Brokers aren’t deterred, though. They still rate the stock as a buy and are tipping a potential 127% upside to $219.06, at the time of writing.

National Australia Bank Ltd (ASX: NAB) 

Concerns about global volatility, higher interest rates, and a slowdown in lending have taken their toll on NAB shares this year. Further fears about rising climbing loan arrears, housing-market policy changes, and slower economic growth have also dampened ASX bank shares across the board. But I think the share price is now close to the bottom, and we could start to see a rebound; sentiment is also looking to be starting to shift. Just last week, some analysts revised their outlook on the stock. Brokers tip the ASX 200 bank stock to climb 8% higher to $39.40 a piece, at the time of writing.

Flight Centre Travel Group Ltd (ASX: FLT)

Flight Centre shares have collapsed 37% since peaking at a 52-week high in January this year. But the company reported a strong third-quarter update earlier this month, despite ongoing travel disruptions and fuel supply challenges. The ASX 200 travel share said its underlying profit before tax (UPBT) has risen 9.7% and its total transaction value is up 7.6% for the nine months to 31 March. Not only that, Flight Centre confirmed that its costs are now well below pre-pandemic levels, productivity is up across the business, and the company is on track to reach its full-year UPBT target of $315 million to $350 million. Brokers tip the stock to climb 57% to $16.19, at the time of writing.

Ampol Ltd (ASX: ALD)

At the time of writing, Ampol shares are just 2% below a two-year high recorded earlier this month. The ASX 200 fuel company’s shares rocketed higher on the back of conflict in the Middle East and concerns about global oil supply. The company has also posted a couple of good news announcements recently. In April, the Aussie fuel supplier said it had submitted a formal remedy offer to the Australian Competition and Consumer Commission (ACCC) about a proposed acquisition of fuel and convenience store operator EG Australia. The company also confirmed a 10% increase in refinery production, higher refiner margins, and increased production in its Q1 FY26 trading update. Ampol has locked in diesel and jet fuel supply through to the end of May, and gasoline supplies to the end of June, despite rising landed crude costs. Brokers tip a 3% upside to $36.16 over the next 12 months. 

The post 4 ASX 200 shares I’d buy with $5,000 this week appeared first on The Motley Fool Australia.

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• 3 ASX shares down over 60% that could be bargain buys

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 Cochlear. The Motley Fool Australia has recommended Cochlear and Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Investing the dividends we receive in new ASX shares is one of the best things we can do.

Compounding is a very powerful force, particularly when it’s supercharged by putting new dividends back into our portfolios.

Investors can choose to take part in a dividend re-investment plan (DRP) or receive the dividend as cash and then choose which ASX share we buy.

I’m planning to put my recently received dividends into Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) for two reasons.

Adjusting diversification

When I put money to work in my portfolio, I like to choose investments I believe will compound for many years.

Soul Patts could be one of the best options for an ultra-long-term investment – it’s already one of the oldest businesses on the ASX, it has been listed for 120 years.

Not only does it have a great portfolio today, but the investment team have the flexibility to change and add to the portfolio as opportunities arise.

It’s invested in sectors like energy, communication services, resources, financials, industrials, retailers, healthcare, banks, technology, industrial properties, building products, agriculture, water rights, swimming schools and plenty more.

I like that investing my dividend income in this ASX share provides pleasing diversification, and in the coming years, its portfolio could continue to evolve to be further future-proofed.

In recent times, the business has said that it’s actively looking for opportunities with international businesses, which I think is a smart idea because there are a lot more businesses – potential opportunities – outside of Australia than inside it.

The Soul Patts portfolio has performed well. Past performance is not a guarantee of future performance, though, of course. But, its portfolio has performed very pleasingly – over the last 25 years it has returned an average of 12.9% per year, outperforming the ASX share market by an average of more than 4% per year.

Growing dividend

The other key reason that Soul Patts really appeals to me is that it aims to pay a larger dividend per share each year. Not many ASX shares can say that they have increased the payout every year for the last decade.

Soul Patts has increased its annual regular dividend every year since 1998! That’s almost three decades of dividend growth, which I think is very impressive. The interim dividend has increased over those 28 years at a compound annual growth rate (CAGR) of 10.4%.

In the FY26 half-year result, it increased its interim dividend by 9.1% to 48 cents per share.

Over the next five years, I think the Soul Patts share price and dividend could rise materially, meaning the outlook is excellent.

The post Why I’m planning to re-invest my dividends into this ASX share this week appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The ALS Ltd (ASX: ALQ) share price is in focus today after the company reported record FY26 results, highlighted by 10.7% revenue growth to $3.32 billion and a 25.8% boost in underlying NPAT to $381.2 million.

What did ALS report?

• Revenue rose 10.7% year on year to $3.32 billion
• Underlying net profit after tax (NPAT) jumped 25.8% to $381.2 million
• Underlying EBIT increased 19.3% to $599.0 million; margin improved 129 bps to 18.0%
• Statutory NPAT was $318.7 million — up 24.4% on last year
• Free cash flow of $674.1 million, with EBITDA cash conversion at 92%
• Final dividend of 23.1 cents per share (partially franked), taking full year DPS to 42.5 cents

What else do investors need to know?

ALS delivered strong organic growth in its Commodities division, with revenue up 18.8%, mainly from increased mineral exploration activity. The Life Sciences division grew revenue by 6%, led by strong performance in its Food business, while Environmental saw softer conditions in the Americas due to both internal and market challenges, which are now being addressed.

The company’s balance sheet strengthened with financial leverage reduced to 1.5x, below its desired range, thanks to solid cash generation and a successful equity raising. ALS also invested heavily in four new hub laboratories across Minerals and Environmental, underpinning future growth. The company continues to deliver industry-leading safety outcomes.

What did ALS management say?

CEO and Managing Director Malcolm Deane, said:

ALS has delivered robust financial performance in FY26, reflecting the resilience of our diversified portfolio, disciplined operational execution and the commitment of our people in continuing to deliver high quality service and outcomes for our customers. Throughout the year, we remained focused on executing our refreshed strategy and advancing the priorities outlined in our value creation framework. This included disciplined capital allocation, targeted investment in growth opportunities and ongoing portfolio optimisation to strengthen returns and position the business for long-term sustainable growth, maximising shareholder returns.

What’s next for ALS?

ALS expects to continue mid to high single-digit organic revenue growth in FY27, with further margin expansion planned. Its new Sydney and Lima laboratories are set to be commissioned in H2 FY27, boosting capacity in key areas. The group also plans to deliver tangible benefits from its Lab of the Future initiative, investing in automation, digital infrastructure and AI.

Management is staying alert to global macro and supply chain risks, but a strong balance sheet positions ALS to pursue organic and inorganic growth. Minerals and Industrial Materials divisions are tipped for double-digit and high single-digit growth, respectively, while Life Sciences aims for improved mid-single-digit organic growth.

ALS share price snapshot

Over the past 12 months, ALS shares have risen 25%, outperforming the S&P/ASX 200 Index (ASX: XJO) which has risen 4% over the same period.

View Original Announcement

The post ALS reports record FY26 earnings and dividend uplift appeared first on The Motley Fool Australia.

More reading

• Pro Medicus inks $90m contract
• Brambles revises FY26 outlook, announces new US$400m buy-back
• Elders posts higher HY26 profit and holds interim dividend
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• What on earth’s going on with Xero shares?

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 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. 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.

Having some exposure to the small side of the market can be a good thing for a balanced portfolio.

That’s because the returns from small-cap ASX shares can be superior to large caps. However, the trade-off here is that they come with higher risk.

With that in mind, let’s look at two small-caps that Morgans believes offer a compelling risk-reward right now. They are as follows:

Accent Group Ltd (ASX: AX1)

This footwear focused retailer could be a small-cap ASX share to buy now.

It was pleased with its investor day event, which outlined bold growth plans through to 2030.

In response, the broker has retained its buy rating and 75 cents price target on Accent’s shares. This implies potential upside of 32% for investors from current levels.

Commenting on Accent, the broker said:

AX1 hosted an Investor Day, outlining its 2030 strategic plan, targeting sales of $1.9bn, 9%+ EBIT margin and 950 stores. This will be driven by operating efficiencies (cost out and store optimisation), growth of sports related banners (Sports Direct, TAF) and growth in vertical owned brands. AX1 also outlined a pathway to profitable growth in FY27, underpinned by closure of loss making Glue/ OzSale, TAF reacquisitions, cost efficiencies and FX tailwind.

We have made no changes to our FY26 forecasts, but increase our EBIT by 2%/1% in FY27/28 incorporating further cost efficiencies. We retain our BUY recommendation and target price of $0.75.

BlinkLab Ltd (ASX: BB1)

Another small-cap ASX share that Morgans is positive on is BlinkLab.

It is a digital healthcare company focused on developing and commercialising a smartphone-based neuroscience diagnostic platform to aid the early diagnosis of Autism Spectrum Disorder (ASD).

Morgans has been impressed with its pilot study and sees a number of potential share price catalysts on the horizon.

As a result, it has put a speculative buy rating and $1.76 price target on its shares. This implies potential upside of over 150%. It commented:

BB1 has recently completed a $17.5m capital raising which comfortably funds its two clinical programs, ASD and Attention Deficit/Hyperactivity Disorder (ADHD), through to approval, which the company expects in FY27 and FY28, respectively. BB1’s pilot study showed impressive results. As a result, a pivotal study recruiting 528 participants is due to read out in late CY26, representing a key milestone.

A successful result would see regulatory clearance around 1QCY27. In parallel, the much larger ADHD opportunity is progressing. Offering potential share price catalyst through upcoming news flow, we initiate coverage of BB1 with a A$1.76 target price and SPECULATIVE BUY rating for investors with a higher risk profile.

The post Morgans names 2 small-cap ASX shares to buy appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Accent Group. 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 Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Owning Wesfarmers Ltd (ASX: WES) shares has been a smart move over the long-term because of how it has steadily grown its profit and dividends for investors.

Past performance is not a guarantee of future performance, of course. Excitingly, analysts expect that the business could continue to please shareholders with steady progress over time.

Forecasts are not guaranteed to become the reported numbers, but I think they’re very interesting to look at. So, let’s look at the potential payouts over the next few financial years.

FY26

The 2026 financial year is nearly over and it has already paid its FY26 half-year dividend, but we don’t yet know what the annual dividend per share will be.

According to the forecast on CMC Invest, the business is expected to pay an annual dividend per share of $2.20 in FY26. That translates into a forward grossed-up dividend yield of 4.4%, including franking credits, at the time of writing for owners of Wesfarmers shares.

I think it’s quite likely that the business can pay something like this because the Middle East conflict and its flow-on effects may not have fully impacted the company.

FY27

Analysts are expecting the company to hike its payout in the next financial year, which is pleasing considering the impacts that could happen amid elevated inflation and higher interest rates.

Pleasingly, Kmart and Bunnings are seen as product price leaders and this could see an increase in market share and possibly higher revenue. Bunnings and Kmart achieve extremely high returns on capital (ROC).

The forecast on CMC Invest suggests the business could pay an annual dividend per share of $2.396 in FY27. At the time of writing, that translates into a grossed-up dividend yield of 4.8%, including franking credits, at the time of writing.

FY28

The final year in this series of projections suggests the business could deliver yet another dividend increase.

According to the projection on CMC Invest, the company is forecast to pay an annual dividend per share of $2.57. That translates into a possible grossed-up dividend yield of 5.1%, including franking credits, for owners of Wesfarmers shares.

If the business does that, the annual dividend per share could increase by around 17% between FY26 and FY28.

Of the major ASX blue-chip shares, Wesfarmers is one of the ones I’m most confident will be able to increase its dividend in each of the coming years because of how well suited its main retail businesses are to help customers in the current climate. Plus, its exposure to lithium mining with the rising lithium price is also beneficial.

Overall, the outlook seems positive for the company.

The post Here’s the dividend forecast out to 2028 for Wesfarmers shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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 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.

Westpac Banking Corp (ASX: WBC) shares have pulled back meaningfully from their highs.

So much so, they ended the week at $35.84, which is down around 17% from their 52-week high of $43.32.

Is this a buying opportunity for investors? Let’s see what Ord Minnett is saying about the big four bank.

What is the broker saying?

Ord MInnett notes that Westpac recently released its half-year results.

Unfortunately, the broker wasn’t overly impressed with the bank’s performance during the six months. It highlights that Westpac’s net interest margin weakened and its revenue missed expectations. And while it was pleased with its cost performance, it notes that this was largely due to seasonal factors. The broker explained:

Westpac Banking Corp said its core net interest margin narrowed 4bp half-on-half (HoH) to 1.78% in the first half of FY26, driven by intense competition for home loan and institutional customers that squeezed lending spreads and as the timing of interest rate rises offset the benefits from higher rates. That weak outcome came despite overall loan volumes, especially in the institutional division, growing strongly.

Cash earnings were pre-reported and the interim dividend was in line, but revenue missed consensus estimates, as a smaller contribution from markets and Treasury and reduced fee income weighed on non-interest income. Costs were a highlight, coming in 2% lower than market expectations, albeit largely due to seasonal factors, and Westpac has guided to increased costs in the second half as the bank lifts IT spending on the crucial UNITE project.

Earnings estimates downgraded

In response to the results, the broker has downgraded its earnings estimates for FY 2026 and FY 2027. This reflects net interest margin softness and higher expected costs. It said:

Post the result, we have cut our EPS estimates by 5.0% and 2.5% for FY26 and FY27, respectively, to incorporate narrower NIMs and higher costs as UNITE spending ramps up, while our FY28 forecast is bumped up 0.1%.

In light of this, Ord Minnett has retained its sell rating on Westpac shares with a $31.00 price target. Based on its current share price, this implies potential downside of 13.5% for investors over the next 12 months.

Commenting on its sell rating, the broker said:

We maintain our target price on Westpac and reiterate our Sell recommendation on valuation grounds, noting the bank faces challenges to convert its lending growth into meaningful revenue gains and has an increasing degree of execution risk the deeper it goes into the implementation phase of its UNITE program.

The post Down 17%: Are Westpac shares cheap? appeared first on The Motley Fool Australia.

More reading

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• Why the big four banks could keep delivering for income investors
• How much do I need to invest in ASX shares for $500 a month of passive income?
• Which Australian banks will benefit the most from rising interest rates?
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Motley Fool contributor James Mickleboro 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.

Shares in Xero Ltd (ASX: XRO) finished last week with a bang.

The ASX tech share rocketed 8% on Friday to close at $79.67, clawing back some ground after a brutal sell-off earlier in the week.

Even with that strong rebound, Xero shares are still down roughly 30% year to date and about 54% over the past 12 months at the time of writing.

That is a shocking underperformance compared to the benchmark S&P/ASX 200 Index (ASX: XJO), which has gained around 4% over the same period.

So what on earth is happening with this once high-flying tech darling?

The market hit the panic button

Friday’s surge looks very much like a classic relief rally. On Thursday, investors absolutely smashed Xero shares after the company released its latest result.

The main issue? Margins. Investors became nervous about profitability as Xero continues pouring money into cracking the US market and integrating its acquisition of Melio.

In other words, the market saw rising costs, heard “lower margins”, and immediately headed for the exits.

Classic tech stock behaviour. But once the panic selling cooled down, investors seemed to remember something important: the actual business is still growing very quickly.

And underneath the scary headlines, there were some seriously strong numbers. Revenue surged 31% to NZ$2.75 billion for the year, showing demand for Xero’s accounting software platform remains extremely healthy.

Recurring revenue also kept flying higher, with annualised recurring revenue jumping 37%. For a software company, that recurring revenue stream is gold because it gives investors much better visibility over future earnings.

US growth story is still alive

Perhaps the biggest reason investors are warming back to Xero shares is the US growth story. For years, investors have viewed the massive US small-business market as Xero’s ultimate prize.

And right now, the company finally appears to be gaining real traction.

Organic growth in the US reportedly accelerated to 30%, suggesting Xero’s expansion strategy may finally be starting to pay off.

That is a big deal. If Xero can establish itself as a serious player in the US accounting software market, the long-term growth runway becomes enormous.

Management’s FY27 outlook also helped steady nerves. The company is guiding toward another year of roughly 34% revenue growth despite ongoing macroeconomic uncertainty.

That hardly sounds like a business hitting the brakes.

Artificial intelligence is also becoming a larger part of the investment story. Management highlighted growing adoption of AI-powered tools like its “Just Ask Xero” assistant, alongside partnerships with OpenAI and Anthropic.

The goal is simple: improve automation, increase productivity, and make the platform even stickier for customers.

So, what next?

Another likely driver behind Friday’s rebound was Xero’s newly announced NZ$550 million share buyback. Buybacks often signal management believes the market has become overly pessimistic about a company’s valuation.

And after a 54% share price wipeout, investors may finally be starting to wonder whether the sell-off simply went too far.

Broker sentiment certainly remains bullish.

According to TradingView data, 14 out of 15 brokers currently rate Xero shares as either a buy or strong buy.

The average price target sits at $130.53, implying roughly 64% upside from current levels.

Meanwhile, analysts at Macquarie Group Ltd (ASX: MQG) remain especially optimistic, retaining their buy rating and lifting their price target to $235.80 (from $223.60).

That implies potential upside of almost 200% if things go right from here.

The post What on earth’s going on with Xero shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther 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 Macquarie Group and Xero. The Motley Fool Australia has positions in and has recommended Macquarie Group and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.