The Challenger Ltd (ASX: CGF) share price finished Friday's session in the red, down 5.2% to $7.11.
This comes after a significant share price gain on Thursday following the release of the company's latest quarterly results. ASX investors appeared very enthused by the numbers and bid the Challenger share price up by 9.49% to $7.50.
But today, broker UBS said it found the share market's reaction "surprising".
Challenger reported a 10% increase in life insurance sales, worth $2.7 billion, for the third quarter of FY22. As well, it reported life book growth of $500 million, up 2.8% for the quarter.
The financial services company also reiterated its FY22 guidance of normalised net profit before tax towards the upper end of the $430 million to $480 million range.
In response to the quarterly report, UBS raised its price target for Challenger shares from $6.40 to $7.30. However, it noted that analyst consensus was already at the upper end of the range at $470 million — so maybe investors got a little carried away on Thursday?
What did UBS say?
According to reporting in The Australian, UBS sent its clients a note saying: "While the tightening profit range 'de-risks' FY22 earnings into the August result and 'removes perceived risk of a management reset' under new chief executive Nick Hamilton, consensus net profit was already at the upper-end of the range ($470m). So we find the strong stock price reaction surprising."
UBS said net outflows of $1.7 billion, excluding the impact of the Whitehelm sale, were well behind its forecast and "represents sequential quarter-on-quarter decline even after adjusting for lumpy mandates".
Further, UBS reportedly said: "We expect fixed income outflows will persist, with global equities flows likely to perform better than domestic equities going forward."
Yesterday, Hamilton commented on the quarterly results: "As we look to the future, we are well placed to continue our growth trajectory, meet the needs of more customers, and deliver on our purpose to provide financial security for a better retirement."
