Stock of the day: Macquarie Group
Macquarie Group reports a $1.6 billion profit shortfall. Explore market strategies and commodities' impact on ASX shares for potential buying opportunities.
(AI video summary)
This video was created on 1 November for IG audiences by ausbiz.
ASX code: MQG
Evaluating Macquarie's financial performance
Macquarie recently announced a $1.6 billion profit for the first half (H1) of the financial year. Although this seems impressive, it fell short of consensus estimates and marked a 23% decline from the previous half. The result was mainly driven by market-facing activities, which contributed $1.4 billion, but these earnings were down 10% from the H1 and 34% from the same period last year.
In response, Macquarie cut its interim dividend to $2.60 and extended its $2 billion share buyback program by another year. As a result, Macquarie’s share price on the ASX 200 has fallen by 4%, currently trading around $221.74.
Trading strategy insights
Experts like Michael Gabel and Jonathan Cadena view the current situation as a potential buying opportunity, despite recent disappointments. Macquarie is known as a dependable trading stock that often attracts traders during periods of weakness. While recent technical indicators suggest a downtrend, those with a longer-term investment perspective could benefit from the current decline.
Important considerations include market resistance levels and channel formations that might signal further downside potential towards the $210 mark. Adopting a patient and strategic approach could be rewarding as the company aims for recovery in the second half (H2) of the year.
Commodities' impact on stock performance
One major challenge facing Macquarie is its underperforming commodities trading division, which hasn't met previous expectations this year. The division has been under pressure due to poor performances in sectors like iron ore and lithium, both experiencing significant declines. However, Macquarie's asset management and mortgage lending divisions have shown strong growth.
Looking forward, upcoming events, such as elections, could sway market sentiment and influence commodity markets positively. This, in turn, might boost Macquarie’s share price, making it an appealing option at current levels.
Investors should stay alert over the next few weeks, watching for market changes, and consider strategic entry points around the $210 level as opportunities present themselves.
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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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