Last month saw the fast-growing telco fall ~40% on a downgrade that was a fraction of that amount. We believe this outsized fall creates an opportunity for 3 key reasons:
- The slight reduction in guidance was a result of temporary, not structural factors , in other words we believe the market overreacted in todays “anti-growth” environment.
- Connection volumes remain strong with ABB continuing to take market share away from its competitors.
- Origin Energy (ORG) could buy ABB which adds some distinct cream to the maths.
We acknowledge that taking on downgrades in today’s market has had mixed results at best but we must look at the reasons behind such moves because value can present itself when panic selling hits a stock. ABB’s growth remains solid with total broadband services up 42% year on year and problems such as an election, supply chain issues and staff shortages should all be in the rearview mirror over the coming year.
MM likes ABB around $4
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NB: We own ABB in our Emerging Companies Portfolio.
