Shore Capital stays upbeat on AJ Bell despite post-results slump

(Sharecast News) - AJ Bell's stock tanked on Thursday after the trading platform operator disappointed the market with margin guidance for the current year, but that hasn't stopped Shore Capital from reiterating its 'buy' rating on the shares. The company delivered record results for the 12 months to 30 September, with revenues up 18% and earnings per share up 26%, with the latter representing a 2% beat to consensus estimates. What's more, a further £50m share buyback was announced on top of a progressive dividend policy.

However, the outlook statement implied a flat profit before tax margin in FY26, held back by a planned £16m investment in distribution and technology costs. The shares fell nearly 8% during the session to settle at 484.4p, their lowest since May.

"The major news from FY25 results is an incremental £16m spend to acquire more customers at a reasonable price, causing a moment of market reflux, and downgrades to our and the market's S/T estimates," Shore Capital said, cutting its EPS forecasts for the next two years by 7% and 4% respectively.

"It is likely that we and others will underestimate the growth which will flow from such a decision, though we have tried to estimate a marketing ROI in our new numbers."

The broker highlighted AJ Bell's 8.1% growth in organic net inflows to the platform in FY25, which is "quite a speed".

"AJ Bell is a winner in an underserved space, with high organic growth creating largely recurring revenues, and it now has the scale to carry on conquering."

Shore Capital has a 600p target price for the shares, implying 24% upside from Thursday's close.

The stock was up 0.3% at 485.8p by 1138 GMT.