Netwealth Group Ltd (ASX: NWL) shares have been strong performers this week.
Thanks partly to the release of a strong quarterly update, the investment platform provider's shares are up 14% since this time last week.
The good news is that Bell Potter doesn't think it is too late to invest. Let's see what it is saying.
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What is the broker saying?
Bell Potter was pleased with the ASX 200 stock's update and the progress the company is making. It said:
NWL has delivered a positive trading update, detailing its strongest net inflow growth since this time last year, and ahead of expectations. All client segments contributed to the result, driven by existing financial intermediaries.
To that end, we consider First Guardian as complete, with strong retail flows experienced, and no signs of account churn were offered. Distribution capabilities have also been upgraded with senior hires from other platform providers. The broker solution is progressing and on track for release with clarity around timing. We view this as a strong opportunity and catalyst.
While Netwealth's funds under administration (FUA) were a touch softer than expected, this was driven by market movements. In addition, Bell Potter notes that markets have since rebounded strongly, reversing this. It said:
NWL reported total FUA of $125.8bn against our $129.7bn estimate, which was flat QOQ and driven by a -$3.7bn market movement, which equates to -3.0% of opening. Subsequent strong positive mark-to-market impacts have reversed most of this. The local share market has advanced +5.7% while offshore indices are up +6.4%. After the dilutive impact of USD depreciation returns would be similar.
NWL continues to demonstrate a strong pipeline with record R12M net account openings and 41 new adviser relationships. This figure is usually provided each half-year. A similar level of managed account models were added during the quarter. About 30% of net inflows are directed into these. Finally, the broker solution is now expected for July release.
Should you buy this ASX 200 stock?
According to the note, Bell Potter has retained its buy rating and $30.00 price target on the ASX 200 stock.
Based on its current share price of $25.22, this implies potential upside of 19% for investors over the next 12 months.
In addition, a 1.7% dividend yield is expected over the period. This would lift the total potential return beyond 20%.
Commenting on its buy recommendation, the broker said:
Following the update, we have downgraded our EPS estimates -1% contained within FY27 and driven by steadier average FUA balances and take-rates. Our Buy rating is unchanged. NWL has de-rated to trade on 28x forward EBITDA consistent with prior risk off environments and compares to 33x through-the-cycle. We would expect the earnings catalysts and sentiment exposure to drive enhanced shareholder returns.
