Fairfax shares jump after broker upgrade
However, a shock profit warning by APN News & Media (see story above) after the market closed is likely to keep gains short lived.
Shares of Fairfax, the publisher of the Herald, rose more than 11 per cent to 54¢ after Commonwealth Bank equities analysts upgraded their valuation of the stock from 43¢ to 59¢. The broker raised its earnings assumptions for Fairfax's real estate classifieds business. "The key change in our assumption is around the strength of Domain's print margins, which we estimate at 30 per cent, versus its digital margins at 35 per cent," said a CBA media analyst, Alice Bennett.
"There does seem to be a solid improvement in sentiment towards companies like Fairfax," said Simon Mawhinney at Allan Gray, which own a substantial stake in Fairfax.
Frequently Asked Questions about this Article…
Fairfax shares rose after Commonwealth Bank equities analysts upgraded their valuation and raised earnings assumptions for Fairfax's real estate classifieds business. The upgrade reflected stronger assumptions about Domain's margins and improved investor sentiment toward Fairfax.
According to the article, Fairfax shares rose more than 11% to 54¢ following the broker upgrade.
Commonwealth Bank analysts revised their valuation for Fairfax from 43¢ to 59¢, supporting the stock's rally.
A CBA media analyst, Alice Bennett, said the key change was around Domain's margins — estimating print margins at about 30% versus digital margins at roughly 35% — which underpinned the higher earnings assumptions.
Yes. The article notes a shock profit warning by APN News & Media after the market closed, and says that development is likely to keep any sector gains short lived, so investors should be cautious about sustained rallies.
Simon Mawhinney at Allan Gray said there appears to be a solid improvement in sentiment towards companies like Fairfax. The article also notes Allan Gray owns a substantial stake in Fairfax.
The article suggests the media sector's difficult year may be easing, with Fairfax leading a rally. However, sector gains could remain fragile because of negative surprises such as APN's profit warning.
The upgrade shows brokers can revise valuations based on stronger earnings assumptions (for example, Domain's margins), which can drive sharp short-term share moves. But the article also highlights that negative news elsewhere in the sector, like APN's profit warning, can quickly limit gains, so watch sector developments and company updates closely.
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