Data Insights

ASX 200 stocks hit with the biggest broker downgrades last week: Nanosonics, Liontown Resources

Tue 30 Jan 24, 10:45am (AEDT)
marketsasx red bear market sell off
Source: Shutterstock

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

NAN

Nanosonics

$3.04

-26.2%

$3.76

$4.71

-20.2%

LTR

Liontown Resources

$0.92

-24.3%

$1.35

$1.69

-20.1%

CXO

Core Lithium

$0.19

-11.9%

$0.21

$0.23

-8.7%

DMP

Domino's Pizza

$39.51

-30.3%

$51.32

$55.08

-6.8%

LYC

Lynas Rare Earths

$6.09

1.5%

$8.56

$9.02

-5.1%

BHP

BHP Group

$47.54

4.0%

$48.70

$51.24

-5.0%

IEL

IDP Education

$19.67

-7.2%

$25.57

$26.85

-4.8%

PRU

Perseus Mining

$1.87

6.9%

$2.30

$2.38

-3.4%

ILU

Iluka Resources

$7.29

10.5%

$7.54

$7.79

-3.2%

PLS

Pilbara Minerals

$3.53

2.0%

$3.77

$3.89

-3.1%

CRN

Coronado Global

$1.62

0.6%

$2.02

$2.07

-2.4%

S32

South32

$3.35

4.4%

$3.90

$3.99

-2.3%

WDS

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.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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