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Goldman Sachs thinks you should buy the dip for these 2 ASX shares 

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For these 2 ASX shares, a reasonable interim result failed to translate into share price gains. After running the ruler for its results, Goldman Sachs thinks the market has got it wrong and reiterates its buy rating and higher target prices. 

2 ASX shares that dipped on earnings 

Jumbo Interactive Ltd (ASX: JIN) 

On Tuesday, Jumbo reported a 9% increase in revenue to $40.9 million while underlying NPAT growth was flat at $14 million. Net profit figures came in slightly above Goldman’s estimates of $13.7 million. Despite a fair result, the Jumbo share price slumped more than 7% on Tuesday and struggled to bounce higher on Wednesday. 

The broker’s view is that Jumbo’s result was broadly in line with expectations, while its medium-term story and long runway for growth remain intact. 

It estimates that the lottery retailing segment has had a promising start to the FY21 second half, noting COVID-19 tailwinds and improvements to the company’s technology.  

Jumbo also flagged strong growth prospects coming out of its newly established end-to-end lottery management offering. It highlighted a large total addressable market opportunity in Australia, estimated at $10.5 billion across the registered charities space. It has already signed up two partners to kick off the new division (Paralympics and St John Ambulance, forecast at around $6.5 million in combined annual total transaction volume).

Goldman believes Tuesday’s selloff likely resulted from a combination of confusion around capital management, an overreaction to market share moves in 1H21 and a broader ASX tech selloff. 

The broker reiterates its buy rating with a 12-month target price of $15.00. This represents an upside of 10.5% to today’s Jumbo share price.  

Hub24 Ltd (ASX: HUB) 

On Tuesday, the Hub24 share price fell 3% after the company announced its 1H21 results

Hub24 delivered a 38% increase in NPAT to $7.5 million while its fully-franked dividend came in at 4.5 cents per share, a 29% increase. Interestingly, these results were broadly below Goldman’s estimates, but the bulk of the NPAT variance can be explained by higher share-based payments to employees. 

Looking ahead, Hub24 reiterated that $10 million in annual cost synergies will be achieved by FY24 and noted that its Xplore Wealth Ltd (ASX: XPL) acquisition is scheduled to close shortly in March. 

The results also included an upgrade to its FY22 funds under advice guidance from $28-$32 billion to $43-$49 billion. Behind the upgrade, Hub24 noted a very strong institutional pipeline, plus potential upside from its platform agreements with IOOF Holdings Limited (ASX: IFL) and Clearview Wealth Ltd (ASX: CVW)

After running the numbers, Goldman downgraded its FY21 underlying NPAT by 8.1% due to the slight earnings before interest, taxes, depreciation and amortisation (EBITDA) miss and higher share-based payments. The broker still maintained a buy rating and reiterated its 12-month price target of $26.58, or an upside of 15% at the time of writing. 

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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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