Here's why the Praemium share price plunged this morning

The Praemium Ltd (ASX: PPS) share price is down 16% on a lost contract.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Praemium Ltd (ASX: PPS) share price is down 16% or 9 cents to 46.5 cents this morning after the fintech platforms provider admitted that the private wealth arm of Australia and New Zealand Banking Group (ASX: ANZ) will not renew its service contract.

The ANZ contract reportedly generated 8% of Praemium's annual revenue or $4 million so it's no surprise to see investors head for the exits this morning. A lot of fast-growing junior tech businesses can be dependent on a handful of large clients which increases the risk for investors if a large client chooses an alternative supplier as in this instance.

On the bright side for Praemium it's also recently announced that it has signed new or renewed deals with Asgard Capital Management "from November 2019, for up to 6 years, with a minimum contract value of $6 million per year". While both Morgan Stanley and Shaw and Partners have both agreed contract extensions worth around $1 million per year.

In fact Praemium stated that all the new agreements signed this financial year will more than offset the revenue decline from the lost ANZ contract. This suggests today's share price falls may be something of an overreaction, although Praemium does have a certain amount of growth baked into its valuation which means the stock can fall heavily if it does not deliver.

Other fast growers to watch in the platform space include Hub24 Ltd (ASX: HUB) and Netwealth Ltd (ASX: NWL), either one of which may have picked up the ANZ contract off Praemium. In fact Netwealth shares are up 5% to $9 today

Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia owns shares of Netwealth. The Motley Fool Australia has recommended Hub24 Ltd and Praemium Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's when Westpac says the RBA will now cut interest rates

Will borrowers need to wait until the middle of next year for relief? Let's find out.

Read more »

Boys making faces and flexing.
Opinions

3 ASX 300 shares to buy and hold for the long run

I believe these stocks have loads of growth potential.

Read more »

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »