Canaccord Genuity lowers target price on CMC Markets

Canaccord Genuity downgraded its adjusted diluted earnings per share forecasts by 25% in 2023 and 10% in 2024, stating it forecasts just 18% growth in net operating income over the next three years, versus CMC's communicated plan to increase net operating income by 30%.

"This leaves our FY25 net operating income forecast circa 10% below the company's target level," said the analysts.

The Canadian bank added that its adjusted dilute EPS forecasts were now 8%, 29%, and 33% below current consensus and said it believes its own forecasts could still be "too optimistic".

"We roll forward our target date to CY24 (prev: CY23), to take account of CMC's growth initiatives starting to bear fruit. We take CMC's average one-year forward P/E multiple since listing as our starting point, which is 12.2x. We now apply a 10% discount to this to reach a target multiple of 11.0x, which we believe is justified by the downside risk to our below-consensus forecasts," said Canaccord, which reiterated its 'sell' rating on the stock.

"Applying an 11.0x multiple to our CY24E EPS forecast results in our new 224p TP (down from 257p), which implies 14% downside from the current share price and a -11% TSR. The next 12-month dividend yield at our new TP is 3.8% and the current buyback, is two-thirds complete."

Reporting by Iain Gilbert at Sharecast.com