The Computershare Limited (ASX: CPU) share price has come under pressure this morning even as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index bounced from yesterday's sell-off.
The CPU share price tumbled 0.9% to $18.16 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index rallied 0.8% with the big banks like the Australia and New Zealand Banking Group (ASX: ANZ) share price and major miners like the Rio Tinto Limited (ASX: RIO) share price outperforming after Monday's trade war scare.
I don't think the market volatility is over. If anything, this could be only the start of a bigger shake-out given that the US and China seem to be moving further away from a trade deal.
Is Computershare at risk of a profit warning?
The Computershare share price could be one stock to target amid the turmoil after Morgan Stanley issued a note predicting shares in the share market services group will fall over the next 60 days!
"This is because the stock has traded up recently, making short term valuation much less compelling," said Morgan Stanley.
"Consensus estimates for investment income remain too high, in our view, and CYTD [calendar year to date] corporate activity is down y/y. We believe current trading multiples are unlikely to sustain at this point in the cycle."
One of the key earnings growth drivers for Computershare is mergers and acquisitions (M&A) and activity in 2019 may not match the stellar results from last year given the greater level of uncertainty clouding markets this time round.
Primed to be a short-selling favourite?
This means shares like Computershare could make good short-selling targets. There's plenty of scope to short-sell Computershare too given that only 1% of its total shares have been shorted compared to 0.9% at the start of April.
Short-sellers are those who borrow a stock to sell on-market in the hope of buying it back at a lower price later to profit from the difference.
Morgan Stanley rates the probability of the stock falling over the next two months at 60% to 70%. The broker has an "underweight" recommendation on Computershare with a price target of $14.50 per share.
On the flipside, there are several attractive stocks to put on your watchlist during the anticipated market volatility.
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