ASX 200 stocks hit with the biggest broker downgrades last week: Nanosonics, Liontown Resources
Brokers cut their target prices for Nanosonics and Liontown by 20% last week. Here's why.
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Mentioned
KEY POINTS
- Nanosonics was downgraded by several brokers after preliminary 1H24 sales fell 2% compared to expectations of 17% growth
- Liontown's debt deal collapsed due to falling lithium prices, brokers downgraded
- Other broker downgrades include Domino's Pizza, Lynas Rare Earths, BHP Group
The period right before reporting season is often known as 'confession season', where companies spill the beans on bad news, hoping to soften the investor panic when the official results are announced.
Nanosonics (ASX: NAN) announced a preliminary first-half FY24 result last week, where sales fell 2% year-on-year compared to consensus expectation of 17% growth. The stock finished the session down 33.4% to a near 4-year low of $2.91.
Nanosonics cited "softer than anticipated upgrade sales with customers extending the use of their existing trophon equipment, delaying the trophon2 upgrade capital purchase" due to "hospital capital budgetary pressures." These pressures were flagged at the AGM in November 2023 but management reassured the market that sales remained "largely in-line with our internal forecast."
"Convincing customers to upgrade their 1st generation trophon units seems to be more difficult than NAN anticipated and the company is now considering 'additional customer offerings'," warned Citi analysts, adding that these offerings could mean offering potential discounts (leading to weaker margins).
In the following day(s), Nanosonics received a number of sharp share price downgrades.
The Biggest Broker Downgrades
Ticker | Company | Close Price | 1-Week | Target Price | Prev Target Price | % Dif |
|---|---|---|---|---|---|---|
Nanosonics | $3.04 | -26.2% | $3.76 | $4.71 | -20.2% | |
Liontown Resources | $0.92 | -24.3% | $1.35 | $1.69 | -20.1% | |
Core Lithium | $0.19 | -11.9% | $0.21 | $0.23 | -8.7% | |
Domino's Pizza | $39.51 | -30.3% | $51.32 | $55.08 | -6.8% | |
Lynas Rare Earths | $6.09 | 1.5% | $8.56 | $9.02 | -5.1% | |
BHP Group | $47.54 | 4.0% | $48.70 | $51.24 | -5.0% | |
IDP Education | $19.67 | -7.2% | $25.57 | $26.85 | -4.8% | |
Perseus Mining | $1.87 | 6.9% | $2.30 | $2.38 | -3.4% | |
Iluka Resources | $7.29 | 10.5% | $7.54 | $7.79 | -3.2% | |
Pilbara Minerals | $3.53 | 2.0% | $3.77 | $3.89 | -3.1% | |
Coronado Global | $1.62 | 0.6% | $2.02 | $2.07 | -2.4% | |
South32 | $3.35 | 4.4% | $3.90 | $3.99 | -2.3% | |
Woodside Energy | $31.18 | 2.5% | $33.38 | $34.12 | -2.2% |
'Target price' is an aggregate of Refinitiv broker target prices. % Dif compares target prices between 19 and 25 January 2024
Liontown (ASX: LTR) was another recipient of a sharp selloff, down 21% last Monday to a near 2-year low of 95 cents. The company announced that following the recent weakness in lithium prices and the declines in price forecasts by reference agencies, its previously announced $760 million debt package with major banks will terminate.
The news attracted a number of broker downgrades due to funding uncertainty and risks of further lithium price weakness.
"While Liontown expect cash on hand of $515 million to be adequate to first production, moving to positive cashflow (previously expected from the end of CY24) is now also expected to be longer dated on lower spodumene pricing," said Goldman Sachs in a note dated 22 January.
The analysts believe a further $200 million funding is required to support working capital and corporate costs during the project's ramp up phase.
