Judo Capital Holdings Ltd (ASX: JDO) shares copped a hiding earlier this year when the company downgraded earnings expectations and upped provisions for bad debts.
The shares have failed to recover since, and are down about 45% on a 12-month basis.
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Time for Judo Capital shares to rerate?
It will be heartening, then, that three separate brokers are tipping solid share price gains for the small-business bank following the company's annual general meeting this week.
And why are they so optimistic about the company's fortunes?
In the words of the Macquarie analysts, "no news is good news".
By this they meant that there was no more bad news coming out of the company which could send the share price even further south.
While Judo's trading update delivered at the AGM was unremarkable, if not a bit soft, it was at least not negative, Macquarie said.
They added:
While the messaging in JDO's 1Q27 trading update pointed to some softer trends and a more cautious growth outlook, we see no major new negative catalyst, which is a positive given current expectations and recent share price weakness. Conditions have softened since the FY26 results, including higher arrears and lower capital, but we suspect this is largely expected by investors given recent share price weakness, and off-balance sheet activities remain available for JDO.
Macquarie made the point that the economic outlook remains uncertain, so it was difficult to extrapolate the trading update across the rest of the financial year.
They added:
While the "caution from SMEs" that was flagged into today's trading update was already factored into the previous guidance, growth could be somewhat slower than JDO's recent run-rate.
Macquarie said credit quality remained a near-term concern; however, the underlying revenue trend for the business appeared sound.
Brokers unanimous that Judo Capital shares will improve
The team at Morgans said the valuation of Judo was compelling at current prices "given the strong growth outlook''.
They added:
Given our discounted cash flow valuation as the base case scenario and zero equity value as the downside scenario, we estimate the share price is implying c.23% probability of failure. This looks unreasonable given the common equity tier 1 strength. JDO is a challenger bank with pure-play exposure to the SME business banking space (leveraging a relationship-driven customer proposition) and a rapidly growing online deposit franchise. We expect earnings growth to be at strong double-digit rates across FY27-29.
Morgans said Judo was higher risk than the larger banks, but investors were compensated with higher potential returns.
Morgans has a price target of $1.44 on Judo shares, while Macquarie has a price target of $1.65. Morgan Stanley has a price target of $1.30.
Judo shares are currently changing hands for 94 cents. The company is valued at $1.04 billion.
