Judo Capital Holdings Ltd (ASX: JDO) shares are higher on Monday, but the bounce follows a brutal month for shareholders.
At the time of writing, the Judo share price is up 2.27% to 90 cents.
Despite the small lift today, the ASX bank stock is still down roughly 37% over the past month and almost 50% in 2026.
That follows a massive 40% plunge on 25 June after Judo updated the market on its asset quality and trading performance.
So, why is the stock getting attention again today?
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Morgan Stanley wants more answers
According to The Australian, Morgan Stanley analysts have cut their target price on Judo by around 32% to $1.25.
The broker said Judo's June update hurt confidence in its near-term earnings outlook.
It also raised questions about its risk appetite, lending standards, broker use, and early risk detection.
Morgan Stanley lowered its earnings per share (EPS) forecasts for Judo by 10% to 22% across FY26 to FY28.
The broker is now forecasting FY27 profit before tax of around $179 million. That is well below Judo's own FY27 guidance range of $210 million to $220 million.
The analysts also want more disclosure around Judo's loan book, particularly its loans to property operators and construction.
The report pointed to $2.7 billion of loans to property operators and $1 billion to construction.
What spooked the market in June
Judo's update last month showed FY26 cost of risk is now expected to be between $116 million and $122 million.
The company said this was mainly due to higher specific provisions for 3 customer exposures.
FY26 profit before tax is expected to be between $163 million and $169 million, which still represents 30% growth from FY25.
Judo also said it remains on track for its existing FY26 guidance for gross loans and advances, net interest margin, and cost-to-income ratio.
However, the profit growth isn't the main issue right now. The focus is on whether the bad loans are isolated.
Keep in mind that Judo is a specialist business lender, not a major retail bank. Its model is built around lending to small and medium-sized businesses, often through relationship bankers.
Hence, when credit quality starts to slip, questions naturally turn to the rest of the book.
Foolish Takeaway
Today's rise looks more like bargain hunting than a proper recovery.
The share price has bounced from its recent lows, but Judo still needs to show these credit issues are under control.
The FY26 results in August should give investors a clearer view of the loan book, provisions, margins, and whether management can rebuild confidence.
Until then, Judo shares may keep getting some support from bargain hunters after the heavy sell-off.
But don't expect the share price to rally to previous levels just yet.
