Insights

Leading broker downgrades Nearmap (ASX:NEA) shares

Here’s why this leading broker has downgraded Nearmap Ltd (ASX:NEA) shares to a neutral rating this morning…
The post Leading broker downgrades Nearmap (ASX:NEA) shares appeared first on Motley Fool Australia. –

finger selecting sad face from choice of happy, sad and neutral faces on screen

The Nearmap Ltd (ASX: NEA) share price is the worst performer on the S&P/ASX 200 Index (ASX: XJO) by some distance on Friday.

In afternoon trade the aerial imagery technology and location data company’s shares are down 14% to $2.47.

Why is the Nearmap share price crashing lower?

Investors have been selling Nearmap’s shares on Friday after it announced the successful completion of its fully underwritten institutional placement.

Nearmap raised $72.1 million at a 4.2% discount of $2.77 and will now seek to raise a further $20 million via a share purchase plan.

Why is it raising funds?

Management advised that it launched the capital raising so that it can capitalise on the momentum of the business and the tailwinds in the industry.

It has identified a number of areas of investment. These include scaling its investment in sales and marketing, accelerating the roll out of the HyperCamera3 systems, and expanding its product solutions to high-value use cases.

Why have its shares fallen so hard?

Given that Nearmap’s capital raising was undertaken at a 4.2% discount, investors may be wondering why its shares have fallen a further 10% on top of this.

I suspect this decline could be the result of a broker note out of Goldman Sachs this morning. According to the note, the broker has downgraded its shares to neutral rating with a $2.95 price target.

Goldman commented: “While we remain attracted to the long-term potential of NEA (technology leadership, large market opportunity) and this capital raising should offer NEA a strong margin for safety (we forecast its Net Cash position to trough at A$81mn in FY22E), strong operating leverage is unlikely to be in evidence until FY23E. In order to return to a more positive stance, we would need to see ACV growth trending materially above our forecasts and driving stronger operating leverage than we currently assume.”

While I agree with Goldman Sachs on the above, I think the pullback in its share price today has created a buying opportunity. In light of this, I feel it could be a great buy and hold option at the current level.

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

Find out the names of our 3 Post COVID Stocks – For FREE!

*Returns as of 6/8/2020

More reading

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Leading broker downgrades Nearmap (ASX:NEA) shares appeared first on Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!