Discovery share price in new high territory following strong growth outlook
Discovery breaks new highs on strong interim update, with 30-35% earnings growth and robust performance across segments driving technical breakout.
Key Takeaways:
Fundamental Analysis:
- Strong growth expected: 25-30% increase in normalized operating profit
- Both headline and normalized headline earnings to rise 30-35%
- Balanced performance across Discovery SA and Vitality segments
- High-quality earnings indicated by consistent metrics
Technical Analysis:
- Share price breaking into new highs
- Upside target at 23050
- Key support at 18900 (potential stop loss level)
- Breaking out of consolidation phase, resuming uptrend
Overall Outlook:
- Strong fundamental performance supported by positive technical breakout
- Momentum-driven move supported by solid earnings growth
- Key risks include sustainability of growth rates and IFRS 17 impact
Interim update reviewed
Discovery's trading statement for the six months ending December 2024 highlights a strong financial performance across all key metrics. The company projects growth of 25-30% in normalized operating profit, while both headline earnings and normalized headline earnings are expected to increase by 30-35%. The alignment between headline and normalized headline earnings suggests minimal impact from exceptional items, indicating high-quality earnings growth.
This consistent growth pattern is reflected across the company's geographic segments, with both Discovery South Africa and Vitality showing similar strong performance. The consistent growth rates across different metrics, significantly above inflation, suggest the company is successfully expanding its operations. While these growth rates are impressive, investors will likely focus on their sustainability and the longer-term impact of the IFRS 17 adjustments.
Overall, Discovery appears to be executing effectively across its business segments, with the balanced geographic performance and consistent growth across all key metrics indicating strong fundamental business performance.
Discovery – technical analysis
The share price of Discovery is breaking into new high territory following the company’s interim trading update. This suggests that the price has moved out of the short term consolidation and renewing its longer term uptrend. Overhead resistance at 23050 provides an upside target from the move.
Traders who are long into the move might consider using a close below the 18900 level as a stop loss indication.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. 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. See full non-independent research disclaimer and quarterly summary.
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