Weekly Reports | Aug 08 2025
This week's In Brief has a selection of growing winners with upside potential and strugglers dealing with adverse headwinds.
-Telix fallout continues with SEC probe, downgrade & pricing pressures
-Service Stream locks In $2.7bn pipeline with NBN contracts
-Reckon’s cloud pivot gains ground despite customer attrition
-Small-cap standout Generation Development sets sales record
By Danielle Ecuyer
This week’s quote comes from Terence Hove, Financial Markets Strategist Consultant to Exness
"Markets point to a near certainty for an interest rate cut in the Fed’s September meeting and anticipate three rate cuts by the end of the year in total.
"If the cuts materialize, the dollar and treasury yields could come under increasing pressure."
Adverse news keeps coming for Telix
Telix Pharmaceuticals ((TLX)) has gone from star bio-tech stock in late February with its share price trading above $31 to shareholders licking their wounds at current prices around $18.
Like other healthcare-related stocks, the prospect of pharmaceutical tariffs from the Trump Administration is at the very least sending negative sentiment headwinds onto the share price. But there's more.
A surprise US SEC subpoena around disclosure on Telix's prostate therapies was a take-no-prisoners moment, with the stock falling -18% on the day the news broke.
The latest market update providing a shift to USD reporting currency this week resulted in a restatement of 2023 and 2024 historical metrics, included another “surprise” earnings downgrade that caught both Jarden and the market off guard.
Telix quantified 1H25 opex costs at 36% of revenue of US$140.1m, which was some US$40m more than consensus. While Jarden considers the share price reaction as overcooked, down another -8.45%, the market’s reaction within the context of so much uncertainty around competitive pressures and pass-through of payment pricing, on top of the SEC probe, is deemed understandable.
The analyst attributes the opex miss to a combination of a lack of sufficient disclosure and recent acquisitions, building up Telix's supply chain and distribution platform for some of its therapies and new diagnostic tests. A US$650m convertible bond issue helped recapitalise the balance sheet.
While the acquisitions have medium-term strategic upside, Jarden points out they are unlikely to be sufficiently earnings accretive until Telix has more products to leverage through the platforms and infrastructure.
Management’s trading update guided to FY25 R&D expense coming in 20–25% above the prior period. Consensus' 1H25 gross margin assumption of 59%–60% is considered reasonable. Adjusting for the updates, earnings before interest and tax estimates have been downgraded by -66.1% for 2025 and -62.8% for 2026.
The revised underwhelming earnings outlook is believed to be discounted in the share price already, with Jarden’s target lowered -5.3% to $27.61 and its Buy rating retained. The company is seen offering a “rich pipeline” of R&D which has the capacity to underpin operating leverage on a higher cost base once its products are approved.
There is another problem though, as quickly highlighted by a flash update from Bell Potter. Competitor Lantheus announced 2Q2025 results which showed Pylarify revenues down -2.3% on 1Q and down -8% on the prior period. Pylarify pass-through reimbursement finished on 31 December 2024, resulting in a -40% price cut for Medicare fee-for-service patients.
The Bell Potter analyst explains a competitor in the PSMA imaging market, believed to be Blue Earth’s Posluma, has been engaging in competitive price cutting. Lantheus anticipates the price for Pylarify will decline in the following two quarters.
Strategically, Lantheus stated they didn’t chase volume based on price, and a new drug has been submitted for application—a second generation of Pylarify with a higher yield. This is a similar strategy being undertaken by Telix with its Gozellix product.
Bell Potter believes the market will establish long-term price equilibrium again, but neither Illuccix, Pylarify, nor Posluma can be price makers in PSMA imaging.
An expected “sugar hit” for the refresh pass-through pricing for Gozellix is due in late September. Beyond that, the analyst expects the PSMA markets to be subject to price deflation. The big unknown is whether the Centers for Medicare & Medicaid Services (CMS) stop companies from pursuing strategies for refreshes on pass-through where there is perceived little or no benefit for patients.
The downgrade in first-half earnings (as discussed above) is reflected in Bell Potter’s earnings forecasts. The broker sticks with its Buy rating and has lowered its price target to $33 from $34.
And yet, this still is not where this week's news flow stops.
The updates above occurred prior to the following announcement from New York lawyers Bronstein, Gewirtz & Grossman, LLC saying they are investigating potential claims on behalf of purchasers of Telix Pharmaceuticals (NASDAQ:TLX). Investors who purchased the securities are encouraged to obtain additional information and assist the investigation.
At face value, it appears like the law firm might be seeking out a class action claim against Telix, which cannot possibly be interpreted as good news.
Onwards and upwards for contractor Service Stream
With three NBN contracts secured since February 2025 totaling around $2.7bn of contracted work, Canaccord Genuity believes there is now a sufficient pipeline of works to underpin its earnings forecasts for the Telecommunications operations.
In February, Service Stream ((SSM)) was awarded a new five-year agreement at circa $1.9bn referred to as the new ‘Field Module Contract’, replaceing two current agreements, Unify Networks and Unify Services, the company has had since 2021.
An upgrade by NBN to the remaining Fibre to the Node network worth around $440m initially for over three and a half years with a two-year-plus option was awarded in June.
In July, another amendment to the existing NBN fibre upgrade was announced, bringing forth circa $360m in revenue over three and a half years in the ACT.
Canaccord expects earnings growth to be boosted by revenue and margin expansion within the Utilities division. The company is also awaiting the outcome for a Defense tender in relation to Property & Asset Services work, as management strategically moves to establish a new work pillar that complements the existing Telecommunications, Utilities, and Transport Infrastructure.
Target price is raised to $2.25 from $1.95 with an unchanged Buy rating. Service Stream is due to report FY25 earnings on August 20.
The proof is in the transitioning pudding for Reckon
First half 2025 saw accounting software revenue growth of 3%, of which Reckon One achieved growth of 26% to $4.4m, underpinned by pricing and an uptick in demand for Reckon's cloud-based payroll solution.
Intentional strategic price rises and intense competition resulted in Reckon One losing the lower average revenue per user customers from both introductory and entry-level plans. Small business cloud user numbers fell to 107k from 111k at the end of 2024.
Moelis reminds investors Reckon ((RKN)) continues its journey of “transformation”, with Reckon One being the single platform onto which Reckon Accounts will migrate.
The recent acquisition of Cashflow Manager is viewed as supporting and improving the functionality of the new platform.
Regarding Legal Group, billing workflow solutions doubled, boosted by the recently launched nQZebraworks cloud-based billing workflow solution.
Management remains committed to strategically cross-selling new products, with the aim of securing more revenue per legal practice and growing the addressable market via customer acquisition of smaller, mid-sized law firms.
Legal Group has achieved growth in new billing customers off a low base, but as explained by the analyst at Moelis, to achieve earnings forecasts Reckon needs to successfully transition customers to Reckon One, which will require time.
Moelis upgrades EPS estimates by 4.1% for 2025 and 4.7% for 2026 with Buy rating retained and 58c target price.
Meanwhile, Morgan Stanley, the only among FNArena's daily monitored brokers who kept on researching Reckon, has called it a day this week.
Abandoning ship with a final rating of Equal-weight (equivalent to Neutral/Hold) and a price target of 58c (around the current share price), Morgan Stanley acknowledges management at Reckon has achieved a lot of progress, but competitive pressures (and risks) remain as the likes of Xero ((XRO)), Intuit and MYOB are keeping pressure on Reckon's business division.
The departing words of Morgan Stanley: "A structural shift to SaaS products presents both an opportunity and a sizable challenge".
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