CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Why the Challenger share price crashed on Tuesday

We examine why the investment management firm saw its stock sold off sharply on Tuesday.

The Challenger share price crashed on Tuesday after the company released, what was received as a lacklustre Q3 trading update.

Company profile: Challenger Limited (ticker: CGF) is an investment management firm, with assets under management in excess of $100 billion. The firm is the largest provider of annuities in Australia.

Investors look to be disappointed by Challenger’s pre-tax, FY21 profit guidance, which is now forecast to come in at the lower end of the previously guided $390 million to $440 million range.

Management attributed this expected profit performance to weaker credit spreads in FY21, which according to the firm, ‘is not fully reflected in customer pricing’.

As a result of this, Challenger said it would respond by ‘significantly adjusting annuity pricing.’

For those reading the fine print, investors may have been concerned that Challenger will undershoot its new, more moderated expectations. Footnote 7 of the Q3 release noted:

‘The covid-19 situation and its impact on markets create an inherently uncertain environment. This could, among other things, impact the speed of deployment of Life’s capital and therefore impact guidance.’

Challenger Share Price Falls

By 1:31 PM the Challenger share price was down 14.09%, to $5.67 per share, as investors sold-down the stock heavily. CGF closed out the session down 15.76%.

This marks a distinct reversal for the stock, with CGF up a little over 40% before the Q3 announcement hit.

Despite this sell-off, analysts from Macquarie reiterated their Neutral rating and $6.30 price target on the stock, while saying:

‘We continue to like the long-term growth thematic, coupled with the capital benefits of the acquisition of the bank licence, however at present valuation looks fair.’

Other Points of Interest

Mind you, while the market responded poorly to this guidance, the Q3 trading update highlighted a number of positive developments.

Chief among them was Challenger’s assets under management, which rose 8% in the quarter to move past $100 billion for the first time.

This, said the firm, was driven by ‘Life annuity book growth' as well as 'a continuation of market leading Funds Management net flows.'

Specifically, Life's net flows in Q3 came in at $1,377 million, notching up record book growth of 9.2% in the process.

Total Life sales were $2,419 million (+155%), while total annuity sales came in at $979 million (+165%). Annuity sales growth, management said, was driven by 'strong growth in domestic term annuity sales' but 'partially offset by a moderation in the contribution from Japan.'

Secondly, looking at Challenger’s funds under management, the firm reported healthy growth driven by $7.0 billion in net flows and buoyant market conditions. Challenger’s FUM currently stands at $99.7 billion.

Want to trade Challenger long or short?

Open an account with us or login into your existing account to get started now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.