MENU

Why Challenger Ltd shares have bounced back today

The Challenger Ltd (ASX: CGF) share price was among the worst performers on Thursday, but on Friday it has been a very different story so far.

In early trade the annuities company’s shares are up a solid 3% to $11.12.

Why are Challenger’s shares bouncing back today?

Challenger’s shares were sold off on Thursday after its quarterly update disappointed the market.

The company’s latest assets under management (AUM) update for the March quarter revealed AUM growth of 3% quarter-on-quarter to $78.5 billion.

While this was positive, investors appeared to react negatively to its total life sales of $1.1 billion, down 13% on the prior corresponding period.

One leading broker that wasn’t put off by the decline in total life sales was Macquarie Group Ltd (ASX: MQG).

Equity analysts at the investment bank have upgraded Challenger’s shares from neutral to an outperform rating following the release of this latest update.

The broker has also lifted its price target on the company’s shares slightly to $13.00, representing potential upside of almost 17% for its shares over the next 12 months.

According to the note, Macquarie’s analysts felt its AUM growth was strong given the weak quarters that other fund managers have reported this month.

Which is a great point. Weak quarters from competing fund managers have led to shares such as Perpetual Limited (ASX: PPT), Magellan Financial Group Ltd (ASX: MFG), and AMP Limited (ASX: AMP) all falling to 52-week lows this month.

Should you invest?

Based on Macquarie’s forecasts for earnings per share of 68.2 cents in FY 2018 and 74.5 cents in FY 2019, Challenger’s shares are changing hands at 16x FY 2018 earnings and 15x FY 2019 earnings.

I think this means Challenger’s shares are attractively priced, just as long as it delivers on Macquarie’s expectations.

Though it is worth noting that not all brokers are positive on Challenger. Shaw and Partners has a sell rating and $9.00 price target on the company’s shares, which I think is something to consider before investing.

Breaking news: ASX companies set to raise dividends!

It's been a nail-biter of a reporting season here in the first half of 2018.

But the real action, in my opinion, is what companies are doing with dividends.

What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.

Click here it's FREE!

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!