Codan Ltd (ASX: CDA) shares are down 0.58% in Tuesday afternoon trade. At the time of writing the shares are changing hands at $34.06 a piece.
Today's decline means the shares are now down 14% from an all-time high of $39.59 recorded in late-January. Although they're still 17% higher for the year-to-date and 99% higher than this time last year.
Now the question is, what's next? Is there more upside ahead or is this the beginning of a sharp sell-off?
Image source: Getty Images
What is pushing Codan shares lower?
Codan develops electronics solutions for government, military, corporate, and consumer markets globally. Based in Adelaide, it runs a dual-engine business spanning communications and metal detection. It's a rare combo that gives it leverage to both defence budgets and goldfields.
Its communications segment designs communications systems, drones, and defence and public-safety equipment. Which means, the stock benefited from a strong price rally off the back of soaring demand for defence-related stocks.
At the same time, its metal detection business segment is also picking up pace. Its products are used by anyone from your local metal detectors who hunt for treasure in their space time to security agents and demining companies.
Earlier this year, Codan posted an impressive first-half FY26 trading update. The company said it expects revenue to jump 29% and net profit after tax to soar 52%. Investors were clearly thrilled with the update and rushed to buy shares.
But in late-January, after the shares spiked to an all-time high, the stock expected a price pullback.
There hasn't been any price sensitive news out of the company since its trading update. This implies the drop in share value is likely a combination of investors taking gains off the table after the strong rally earlier this year, and some softening in the gold price.
The price of gold also soared to an all-time high in late-January but has since dipped again after lower trading volumes dampened demand.
Are Codan shares a buy, hold or sell?
Sentiment about the outlook for Codan shares is mixed but TradingView data shows that the majority (four out of seven analysts) have a hold rating on the stock.
However, after the latest share price decline there is a consensus view of upside ahead for the share price. At the time of writing the maximum target price for Codan shares this year is $42.31 a piece, which implies a 23.88% upside for investors. Even the average $39.01 target price implies the shares could gain 14.21% over the next 12 months.
Earlier this month fund managers at Wilson Asset Management (WAM) said they're positive on the outlook for Codan shares, underpinned by defence sector and gold price tailwinds.
Codan is expected to post its half year results for FY26 later this week on 19 February.
