Insights

The Accent Group (ASX:AX1) share price just got hit by a broker downgrade

The Accent Group Ltd (ASX: AX1) share price is lagging behind the consumer discretionary sector after it was downgraded by Morgan Stanley.
The post The Accent Group (ASX:AX1) share price just got hit by a broker downgrade appeared first on The Motley Fool Australia. –

shoes asx share price represented by white shoes against pink and blue background AX1 share price downgrade

The Accent Group Ltd (ASX: AX1) share price is lagging behind the consumer discretionary sector after it was downgraded by Morgan Stanley.

The AX1 share price is trading flat at $2.41 during lunch time trade when the sector gained 0.4%.

Big gains by the Premier Investments Limited (ASX: PMV) share price, JB Hi-Fi Limited (ASX: JBH) share price and Harvey Norman Holdings Limited (ASX: HVN) share price is pushing the sector ahead of the S&P/ASX 200 Index (Index:^AXJO).

Time to take profit on the AX1 share price?

The Accent Group share price is probably held back by Morgan Stanley after it urged investors to take profit now.

The broker downgraded the footwear retailer to “equal weight” from “overweight” as it believes Accent’s growth momentum is slowing.

“AX1 has executed strongly over the last 12 mths in unusual conditions,” said Morgan Stanley.

“Whilst near-term momentum should continue, we think EPS [earnings per share] growth will decelerate from +28% in FY21 to +3%in FY22 as conditions normalize.”

Strong trading update fails to inspire

The downgrade follows a bullish trading update by Accent. Management is expecting earnings before interest, tax, depreciation and amortisation growth of around 40% to 45%.

The earnings boost is supported by good top-line growth, cost savings from rent abatements and wage subsidies and accelerating like-for-like store sales growth.

But Morgan Stanley believes all the good news is priced in even as it lifted its 12-month price target on the AX1 share price to $2.60 from $2 a share. The lift in the price target is due to the better-than-expected trading update.

Earnings momentum running out of puff

However, the broker doesn’t believe the good times can be sustained – at least not at the same pace. Results in the current financial year will be great due to a “pull-forward” in demand for its shoes.

This refers to consumers rushing to buy sports equipment during the COVID-19 lockdown. This means fewer will need to buy shoes over the next several months.

Also, the subsidies and stimulus during the pandemic will taper off. As the vaccine is rolled out and when consumers start holidaying again, they will be spending less on sports equipment too.

Good news already reflected in the AX1 share price

“AX1′ strong momentum is now reflected in the share price, increasing +42% over the last 12 months, meaningfully outperforming the XJO -1%,” noted the broker.

“We see limited valuation upside with the stock trading on 18xFY22 P/E or a ~25% premium to the five-year average multiple of 14.5x.”

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

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

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The Accent Group (ASX:AX1) share price just got hit by a broker downgrade appeared first on The 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!