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On Thursday, UBS analyst Kieren Chidg downgraded Computershare Limited (CPU:AU) (OTC: CMSQY) stock from Neutral to Sell, adjusting the price target to AUD39.00 from the previous AUD37.40. The downgrade comes despite the company’s impressive 56.7% return over the past year and strong financial health, as indicated by InvestingPro’s analysis. The downgrade reflects concerns over the company’s performance amidst a challenging market environment.
Chidg noted that Computershare has managed to outperform expectations following its first-half 2025 results, despite a lower yield outlook and increased market volatility. These conditions pose a risk to the company’s short-term transactional revenues. The company’s strong fundamentals are reflected in its 32-year track record of consistent dividend payments, as highlighted by InvestingPro. UBS forecasts that Computershare is still on track to meet its approximately 15% FY25E EPS growth guidance, with UBS’s own estimate slightly higher at 16%.
This positive outlook is supported by industry feedback, which suggests that trading in employee share plans remained robust in the third quarter of 2025. Additionally, industry data indicates strong activities in corporate actions and corporate trust issuance. Nevertheless, Chidg points out that lower margin income yields could limit EPS growth into FY26E.
Despite the company’s solid performance, UBS expresses caution regarding Computershare’s valuation. The firm’s current P/E ratio stands at 28.6x, significantly higher than UBS’s cited forward P/E of 19.2x, which is already 14% above its 10-year average. According to InvestingPro’s Fair Value analysis, the stock is currently trading near its Fair Value. Given the lower near-term EPS growth prospects, with a compound annual growth rate (CAGR) of only 3.3% from FY25 to FY27E, and limited scope for further buyback support after FY25E, UBS believes that the valuation risks for Computershare are tilted to the downside. InvestingPro subscribers have access to over 10 additional key insights about Computershare’s valuation and growth prospects.
In other recent news, Computershare Limited has been the focus of multiple analyst assessments and ratings updates. Fitch Ratings upgraded Computershare Trust Company’s long-term Issuer Default Rating to ’BBB+’ from ’BBB’, reflecting the company’s strong profitability and liquidity. The upgrade follows the merger with Wells Fargo (NYSE:WFC)’s Corporate Trust Services, which enhanced Computershare’s size and scope. Meanwhile, JPMorgan downgraded Computershare stock from Neutral to Underweight, citing concerns over earnings per share growth and valuation multiples, while raising the price target to AUD35.00. Jefferies also downgraded the stock from Buy to Hold, increasing the price target to AUD39.50, acknowledging the company’s strong management income and revised earnings per share guidance.
Macquarie maintained a Neutral rating with a price target of AUD34.00, highlighting the company’s operational efficiency and strategic share buyback program. Citi reaffirmed its Neutral stance, maintaining a price target of AUD35.00, noting a 19% year-over-year increase in diluted earnings per share and a revised full-year management EPS guidance. Computershare’s first-half 2025 earnings exceeded market expectations, driven by robust transactional revenue and a lower effective tax rate. The company’s margin income forecast has been adjusted upwards, reflecting an optimistic outlook on expected balances. These developments indicate a dynamic period for Computershare as it navigates market conditions and strategic opportunities.
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