The SWM share price didn't go from 80 cents a share in 2022 to 15 cents a share because Stokes was appointed chairman. The fact is that we have had the longest lasting per capita recession in Australia's history and this consequently caused one of the biggest ad market recessions which has deeply affected the Total TV ad market.
The fact is that ALL media business (SXL, A1N, OML, NEC) have had their share prices massively sold down because of the RBA interest rate hiking cycle- now that the RBA has pivoted dovish in a massive way it is completely insane to ignore this and what this new liquidity does for the ad market (and consequently the SWM share price).
As mentioned by Collins Street Asset Management the share market pessimism is based around 1. concerns about the ad market 2. desire for a dividend.
The RBA lowering interest rates and giving clear guidance that they considered a 'supersized' 50 basis points cut at the May meeting means that the restrictive monetary conditions are finally coming to an end. Because of this the ad market momentum continues to improve and consequently it places SWM in a strong revenue position to meet shareholders desire for dividends.
The operating leverage of SWM means even modest increases in the ad market result in massive increases in SWM profits. This is the reason why the SWM share price can and will deliver multi-bagger returns.
Buying SWM while it trades at less than 1.5x mid cycle earnings of $155m NPAT is an absolute no brainer particularly when you factor in the massive tailwinds that the RBA interest rate cutting cycle delivers.
SWM Price at posting:
15.5¢ Sentiment: Buy Disclosure: Held
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