Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Tuesday, Goldman Sachs revised its rating for Computershare Limited (CPU:AU) (OTC: CMSQY), downgrading it from Neutral to Sell. The firm also adjusted its price target to AUD37.50, a slight decrease from the previous target of AUD38.00. According to InvestingPro data, the stock is currently trading near its Fair Value, after posting impressive returns of 50% over the past year and 41% in the last six months. Goldman Sachs analyst Julian Braganza cited multiple factors for the downgrade, including expectations of macroeconomic headwinds and the company’s sensitivity to yields.
Computershare’s market interest (MI) is anticipated to be a significant challenge, as the company is highly responsive to yield fluctuations, despite hedges that mitigate short-term sensitivity. While Goldman Sachs’ baseline forecasts for rate cuts suggest potential earnings downside risk, InvestingPro analysis shows the company maintains strong financial health with a "GREAT" overall score and operates with a moderate debt level. The company’s current ratio of 1.51 indicates sufficient liquidity to meet short-term obligations.
Additionally, Computershare’s balances are closely tied to activity levels, such as corporate actions, which may be affected by the uncertain economic environment. The core business of Computershare could also face weaker trends due to its reliance on transaction revenues.
Looking ahead, risks into the fiscal year 2026 include the normalization of Employee Share Purchase Plan (ESP) transaction revenues and the impact of economic uncertainty on corporate actions. The uncertainty in corporate trust also contributes to the potential challenges for Computershare.
The valuation of Computershare, currently trading at approximately 18 times its 1-year forward earnings, is another concern for Goldman Sachs, which notes that this comes with some earnings downside. The firm’s earnings estimates for fiscal years 2026 and 2027 are 2% and 5% below consensus, respectively.
Despite the risks outlined, Braganza acknowledged upside risks such as the possibility of accretive capital deployment. However, he noted that Computershare has struggled to identify suitably priced opportunities. Expense growth has moderated over the first half of 2025, but cost-out programs are nearing expiration. The company’s financial strength is evident in its metrics, with InvestingPro revealing 12 additional key insights, including a 32-year streak of consistent dividend payments and strong long-term returns. Subscribers can access detailed analysis of the company’s valuation metrics, growth potential, and comprehensive financial health indicators.
In other recent news, Computershare Limited has been in the spotlight following several significant developments. The company reported strong first-half 2025 results, leading to an upgrade in its earnings before interest and tax (EBIT) excluding margin income (MI) guidance, alongside an increase in forecasted margin income. This positive financial performance prompted Jefferies to raise its price target to AUD39.50, despite downgrading the stock from Buy to Hold. Similarly, UBS downgraded Computershare from Neutral to Sell, citing concerns over valuation and a challenging market environment, while maintaining a price target of AUD39.00. JPMorgan also downgraded the stock to Underweight, adjusting the price target to AUD35.00, reflecting apprehensions about future earnings growth and valuation metrics. Meanwhile, Fitch Ratings upgraded the long-term issuer default rating of Computershare Trust Company, National Association, to ’BBB+’, highlighting its strong profitability and strategic significance within the Computershare group. Macquarie maintained a Neutral rating with a price target of AUD34.00, acknowledging the company’s robust performance and ongoing share buyback program. These developments indicate a mixed sentiment among analysts regarding Computershare’s valuation and future prospects.
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