Is the Challenger share price cheap after sliding 13% in a month?

Challenger shares have had a rough month. Time to buy?

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Key points

  • Challenger shares have had an especially hard month 
  • The annuities provider has fallen 13% since late May 
  • So let's see if any ASX expert investors reckon this is a buying opportunity... 

It’s certainly been a tough time for the Challenger Ltd (ASX: CGF) share price of late. Challenger shares are today down a painful 1.05% at $6.57 a share. That’s in stark contrast to the S&P/ASX 200 Index (ASX: XJO), which is currently in the green, having recorded a 0.31% gain so far today.

But Challenger’s woes go further back than today. This annuities provider has now slid by a nasty 13.3% over the past month alone. It was only last month that we saw Challenger at a 52-week high of $7.72 a share.

The past month’s dreary performance comes despite there being a total lack of news or announcements out of the company. So does this mean we could be looking at a buying opportunity for Challenger shares here?

Is the Challenger share price a buy today after a 12% slide?

Well, one expert who thinks it might be is TMS Capital portfolio manager Ben Clark. Last month, we covered how Clark chose Challenger as his pick for a higher interest rate world. Here’s some of what he said:

[Challenger is] effectively Salesforce Inc (NYSE: CRM), with financial planners pushing their products, particularly bank-employed financial planners. But it was also impacted by the move in cash rates to zero. Annuities don’t sound particularly attractive when you’re locking in a 1% rate for the rest of your life…

[It’s now] much more closely aligned to institutional solutions for annuities, particularly things like inflation linked to annuities and more boutique solutions to problems in big LICs… there’s earnings momentum coming back.

But Clark is not the only one bullish on Challenger. Last month, we also covered ASX broker UBS’s take on the company. In May, UBS rerated challenger shares as a buy and upped its price target for the company as well. UBS also reckons the company will benefit from higher interest rates and is “on the cusp of a material rebound in life profitability”.

So given the Challenger share price has slid meaningfully since these bullish opinions were aired, it’s likely that UBS and TMS Captial are both still bullish on Challenger shares in June.

At the current Challenger share price, this ASX 200 financials share has a market capitalisation of $4.46 billion, with a dividend yield of 3.37%.

Motley Fool contributor Sebastian Bowen 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 Salesforce, Inc. The Motley Fool Australia has recommended Challenger Limited and Salesforce, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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