Weekly Reports | May 19 2025
Weekly update on stockbroker recommendation, target price, and earnings forecast changes.
By Mark Woodruff
Guide:
The FNArena database tabulates the views of eight major Australian and international stockbrokers: Citi, Bell Potter, Macquarie, Morgan Stanley, Morgans, Ord Minnett, Shaw and Partners and UBS.
For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.
Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.
Summary
Period: Monday May 12 to Friday May 16, 2025
Total Upgrades: 12
Total Downgrades: 5
Net Ratings Breakdown: Buy 61.62%; Hold 32.02%; Sell 6.36%
In the week ending Friday, May 16, 2025, FNArena tracked twelve upgrades and five downgrades for ASX-listed companies from brokers monitored daily.
For the third week in a row, the top ten percentage falls in average target prices and average forecasts were consistently larger than rises.
At the end of the week, cloud-based accounting software provider Xero reported FY25 results showing earnings in line with consensus, yet the company heads up the positive change to earnings table as brokers continue to anticipate longer-term upside.
Management is prioritising sales-driven dollar growth over percentage margins, noted Macquarie, with product velocity, accelerating payments, and international subscriber growth providing key tailwinds. This broker raised its target to $204 from $191.90.
Citi highlighted annualised monthly recurring revenue infers a potential lift of 5% to consensus revenue forecasts for FY26, having grown 22% compared to a year earlier. Net additions in the UK and US were better than anticipated in the second half at 79,000 and 35,000, respectively.
Raising its target to $215 from $196, UBS stated Xero deserves a premium valuation as management is delivering on strategy, keeping the company as a member of the 'Rule of 40 Club'.
Following Xero on the earnings upgrade list, Macquarie Group also received two ratings upgrades from each of Morgans and Citi.
Positively, the group posted earnings in line with consensus for the first time in eight reporting periods, UBS noted, while also retaining guidance despite global uncertainty.
Among varying broker opinions detailed at https://fnarena.com/index.php/2025/05/13/macquarie-pleases-the-sceptics/, Ord Minnett praised management's foresight in identifying global trends, such as digitisation of the economy, the energy transition, and infrastructure expansion as urbanisation intensifies.
Turning to ratings downgrades, here Coronado Global Resources received two from separate brokers to Hold or equivalent from Buy.
Both Coronado and Stanmore Resources fill the top two placings in both the negative change to target price and earnings tables largely because Morgans last week lowered its coal price forecasts.
UBS also weighed in on Coronado, suggesting negative free cash flow for the next two years means new debt funding is likely to be expensive, particularly given the recent downgrade by Fitch Ratings of the company's long-term issuer default rating.
After allowing for cost-out and productivity improvements at Coronado, and a full drawdown of its US$96m asset-backed lending facility, the analysts assess new funding is required.
Investors could be forgiven for adopting a bleak outlook for coal stocks in general given historically low met coal prices, excess Chinese steel exports, and negative overall sentiment, yet Morgans adopts a counter-cyclical stance.
This broker sees an attractive entry point for patient investors as explained at https://fnarena.com/index.php/2025/05/14/treasure-chest-whitehaven-versus-stanmore/
Paladin Energy and Vista International follow Coronado and Stanmore on the earnings downgrade table.
Shaw and Partners lowered its FY25 earnings forecast for Paladin to account for a -US$20m impairment on ore stockpiles, which has reduced the carrying value to US$43.7m. but revised up its FY26 forecast due to lower amortisation charges.
This broker was adjusting forecasts after the company's first quarterly report containing full financials. Paladin is now dual listed on the ASX and Toronto Stock Exchange (TSX), with the latter requiring quarterly updates.
The impairment wasn't a surprise to Shaw, and a lot less in dollar terms than the hit the stock took when the issue was originally revealed in the September quarterly.
After running a downside scenario analysis for uranium prices (US$70/lb term and US$63/lb spot price), Ord Minnett last week concluded Paladin's free cash flow yield remained acceptable.
Regarding New Zealand-based global technology company Vista International, UBS is forecasting a weaker contribution from cinema due to slower recovery in US box office, and lower uptake in the cloud business.
If management can execute on its payments go-to-market strategy, the analysts estimate potential valuation upside of between 20-90cps, all else remaining equal, although it is too early yet to factor this into the broker's current NZ$3.90 price target.
Management is aiming to leverage its unified, cloud-based SaaS platform to deliver integrated payment solutions as part of its broader cinema management and entertainment industry offering.
Dyno Nobel and Aristocrat Leisure appear third and fourth on the negative change to average target price list with falls of around -5% apiece.
Despite the lower target Dyno Nobel, formerly known as Incitec Pivot, reported consensus-beating first-half underlying earnings from its Explosives business.
The company realised $25m in net benefits from its Transformation Program and management touted key milestones achieved in the separation strategy announced in September as explained at https://fnarena.com/index.php/2025/05/15/dyno-nobel-flicks-the-switch-to-blasting/
While Aristocrat Leisure's interim earnings disappointed largely due to a fall in average fee in the Gaming division, several brokers build a case for a stronger second half at https://fnarena.com/index.php/2025/05/19/aristocrats-h1-misses-but-strong-growth-ahead/
On the flipside, brokers raised average targets for tracking technology company Life360 and uranium miner Boss Energy by around 11% and 6%, respectively.
Compared to consensus, Life360's March quarter produced revenue and earnings beats of 3% and 75%, respectively.
The company achieved an acceleration in subscribers and active users. RBC Capital noted potential for a reduction in fees charged by Apple. See also https://fnarena.com/index.php/2025/05/14/records-abound-for-life360/
Boss Energy's average target received a boost from Ord Minnett, after the broker raised its target price to $6 from $4.50, citing strong momentum and the potential for a higher share price based on an ongoing short squeeze.
Despite shares rallying by 66% in the past three weeks, short interest on the ASX still sits at 25% of shares outstanding.
Boss Energy continues to generate attractive free cash flow yields from FY28 due to the low costs of its Honeymoon project, noted the analysts.
Total Buy ratings in the database comprise 61.62% of the total, versus 32.02% on Neutral/Hold, while Sell ratings account for the remaining 6.36%.
From an historical perspective, Buy ratings are exceptionally high, with the other two components well below long-term averages. This set-up is likely indicating a small circle of momentum-driven winners against an unusually large part of the share market that is not receiving much attention from investors.
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