GMG caught our attention on Monday as it closed lower in a firm session, a rare occurrence so far in 2024, where GMG has surged over +33%, making it the best-performing stock in the sector. This is a great company, but we feel there are short-term risks on the downside for a few simple reasons:
- GMG’s recent result was great, though guidance for FY25 was below market expectations. That is a usual occurrence, with GMG typically under-promising and over-delivering.
- We believe that GMG is a “crowded trade”, which could easily see the stock unwind ~10% from current levels.
- GMG remains “rich” from a valuation perspective, which is not ideal considering the above two points.
However, the post-results call with Greg Goodman swayed our current view and stance towards GMG, we felt he was trying to allay analyst bullishness on upgrades this year, which supports our short-term cautious stance.
- We remain keen buyers of GMG around $30, which is not out of the question in today’s volatile market.