Hub24 Ltd (ASX: HUB) shares have taken a tumble over recent weeks, but one leading broker believes this could be an opportunity in disguise.
At the time of writing, the ASX 200 tech stock is trading at $68.11, which is down approximately 26% from the 52-week high of $92.65 it reached in February.
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Why has this ASX 200 tech stock dropped?
According to Bell Potter, the recent share price weakness has been driven largely by negative market movements rather than anything fundamentally wrong with the business.
Equity markets have softened in the first quarter, with the All Ordinaries index down 4.4%, the S&P 500 off 4.6%, and the tech-heavy Nasdaq falling by over 8%. This has led to mark-to-market adjustments that have weighed on the ASX 200 tech stock's Funds under Administration (FuA), a key driver of the business.
As a result, Bell Potter has made modest earnings downgrades of 3% to 4% across FY 2025 to FY 2027, reflecting slower-than-expected FuA growth over the near term.
Still a structural growth story
Despite the short-term headwinds, the broker is confident the structural growth engine remains strong.
Bell Potter is forecasting Custody FuA to rise 2.8% quarter-on-quarter in Q3, underpinned by net fund flows. The first six weeks of the quarter delivered $1.5 billion in flows — a result the broker describes as "better-than-expected," especially given this quarter is typically the softest of the year.
More importantly, momentum appears to be building, with increased inflows from new financial intermediaries and the potential for long-term adviser productivity to lift significantly. It said:
We think the underlying cadence can continue to improve, as evidenced by increasing net flows from new financial intermediaries, indicating greater momentum in the front book and underpinning our medium-term growth forecasts.
We find that vintages could translate into net fund flows of +$14bn pa, assuming FuA per adviser converges to the industry average. This would be consistent with (and at the upper end of) company guidance for FY26e Custody FuA of b/w $123-135bn; the key parameter being net fund flows of +$11-15bn pa. For reference, we maintain our projection for +$11.6bn in FY26e.
Time to buy
The broker has retained its buy rating on the ASX 200 tech stock but trimmed its price target by 16% to $78.00 per share. This still implies potential upside of approximately 15% for investors from current levels.
Overall, Bell Potter believes the pullback is an "opportunity to buy." It said:
Reiterate Buy. Mark-to-markets look to produce a growth headwind against 3Q25 FuA and sentiment. Longer-term, HUB is supported by adviser growth, and we continue to expect structural tailwinds, predicated on a growing precedence to accelerate market share and capture non-traditional assets through the platform. HUB has developed its lead as the best platform overall, delivering impactful new enhancements, and topping AusSuper as the leading fund for competitive superannuation flow. Opportunity to buy.
