Healius slides 7.6% on Morgan Stanley downgrade

The news: Shares in Healius have plummeted more than 7% after Morgan Stanley downgraded the pathology and diagnostics company to 'underweight', citing earnings concerns.

The news: Healius gave up most of its 7.7% in gains since Monday, tanking 7.6% after Morgan Stanley released the note. HLS shares had rallied as much as 35.6% from $1.225 in late November to $1.665 in early January, but has mostly been correcting in 2023. It closed the week at $1.46, which is still at a premium to Morgan Stanley's revised target of $1.30.

The context: In its earnings forecast, Morgan Stanley said Healius' FY24 guidance looked too high, and given the company's "track record" it predicted no net increase from a proposed $15 million cost saving program. Healius was recently an acquisition target of Clinical Labs in a deal that was blocked by the competition watchdog.

What they said: "Given recent share price strength, we think HLS's P/E multiple is too high in light of the earnings uncertainty and we downgrade to UW," Morgan Stanley wrote in a research note.