In morning trade the G8 Education Ltd (ASX: GEM) share price has bounced back from yesterday's huge decline and is up over 4% to $3.54.
Why are its shares higher?
This morning's gain is likely to be related to a couple of positive broker notes released this morning in the aftermath of yesterday's sell-off.
According to notes out of both CLSA and UBS, both brokers have retained their buy ratings on the childcare operator despite its surprise profit downgrade.
On Monday G8 downgraded its FY 2017 earnings before interest and tax guidance to around $160 million from mid $170 million due to falling occupancy levels. This will mean growth of just 5% year-on-year.
But the brokers clearly still see a lot of value in its shares and have adjusted their price targets to $5.40 and $4.25, respectively.
CLSA's price target implies upside of over 50% and UBS' price target equates to 20% upside.
Should you invest?
While these price targets and G8's dividend could mean sizeable returns for investors, I wouldn't be a buyer of its shares until there is proof that its occupancy levels are trending higher again.
Until then, I would suggest investors look for value and income elsewhere on the market with shares such as Telstra Corporation Ltd (ASX: TLS) and Accent Group Ltd (ASX: AX1).
