The Watkin Jones Plc (LSE:WJG) share price plummeted this year after the firm announced two shocking revelations. The first news that took the investor community by storm was the increased cost of funding and consideration of the sale of non-core assets on its balance sheet. Then, following this, the announcement of Chief Executive Officer Richard Simpson stepping down further agitated the investor community.

This news took a huge drag on the Watkin Jones share Price. The stock opened on the trading floor with a 35% decline. Amidst all this confusion and uncertain times, let’s dig deeper into the future of the company’s stock.

Key Points

• The news of the sale of non-core assets and the CEO stepping down took a huge toll on the Watkin Jones share price.
• Watkin Jones share has been on a prolonged bearish run since the start of 2022.
• Relative property returns are more attractive in the residential sub-sector.

What does Watkin Jones do?

Watkin Jones Plc is a UK-based construction and property development company. Their main focus is Build-to-Rent (BtR) and student accommodation in the UK. The company is continuously investing in new projects, with many locations completed in 2022 and many more in the pipeline for 2023.

The bull case for the Watkin Jones share price

During the prolonged bearish run, the Watkin Jones share price has had a brief period of bullish performance. The stock rose from 223.5p to 259p from February 2022 to March 2022. Then again, the stock recovered by 42% from 80p in September 2022 to 113.6p in January 2023.

The market for student accommodation is ever-thriving. There are a total of 2.2 million full-time students in the UK, with a 4% year-on-year growth¹. Moreover, this sector has seemingly continuous investment demand. But it experiences suppressed activity. There is no doubt a lot of room for growth and progress. At least, that’s what I think.

The bear case for the Watkin Jones share price

Overall, Watkin Jones share has been on a bearish run since the start of 2022, with brief periods of recovery. From the peak price of 268p in January 2022, the stock has dropped to a low of 47p quite recently. During this one-and-a-half year, the stock has lost almost 83% of its value.

In addition to this prolonged bearish trend, the company is also facing a decline in earnings. Also, annual earnings are forecasted to have a slower growth than the overall market.

This will result in a sharp decline in investor willingness to invest in Watkin Jones shares.

Watkin Jones Share price prediction

Despite the bearish performance of Watkin Jones Share price, it has a positive outlook from analysts’ point of view. The 12-month forecast shows a target of 130p with a high estimate of 175p and a low estimate of 93p. Overall, analysts have a buy recommendation for the property development company’s stock.

Forecasts always have an element of uncertainty. However, given the material impact of the negative developments surrounding this company, it’s possible that shares have been oversold in the chaos. Panicking investors do create buying opportunities. But is this one worth taking?

Should I buy Watkin Jones shares today?

I have no doubt that the UK living sector is facing short-term liquidity challenges. However, there is long-term growth expectation within the sector. Also, relative property returns are more attractive in the residential sub-sector.

Also, some of Watkin Jones’ value addition factors, like the location near amenities and transport and targeted sectors well aligned with the national policies, have resulted in the company’s outperformance.

While the current situation seems bleak, I’m cautiously optimistic. As the property market eventually and steadily recovers, I feel this company may be able to bounce back. Therefore, I’m currently tempted to open a small speculative position within my portfolio.

Article sources

1. Watkins Jones Plc. Half Year Results to 31 March 2023

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.

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