Australia’s most shorted stock has only one analyst saying sell

Bloomberg

It’s Australia’s most-shorted stock, but only one of the 10 analysts covering it considers it a sell. Meet Aconex Ltd., a Melbourne-based company whose software helps architects and developers work together in the cloud. If you believe the sell-side, shares will rise 10 percent over the next year. Bears, however, have a completely different opinion: their bets against Aconex are near the highest on record — and the most among 933 stocks listed down under for which data are available.
While it’s far from uncommon for investment bank analysts and short sellers to take diverging views, seldom has the contrast between optimism and pessimism been more stark. Generally, the most-shorted stock in a market will have at least a few sell ratings.
“The analysts have been part of the hype,” said Stephen Mayne, a director at the Australian Shareholders Association, which promotes the interests of retail investors. “Many of the sell-side analysts have potentially gotten too close to the company.”
Aconex’s Leigh Jasper, co-founder and chief executive officer, declined to discuss the short interest but said he has faith in the company’s prospects. “It’s not for us to comment on the market,” Jasper said by email. “The company has doubled revenues over the last two years and we are confident of increasing annual revenues by at least 20 percent over the medium to long term, underpinned by the huge opportunity to further penetrate the world’s largest construction markets.”
For a long time, the bulls were right. Aconex began a rapid ascent after going public in December 2014. In less than two years, the stock more than quadrupled.
The company regularly beat revenue forecasts, winning new customers and charging recurring fees for use of its software, a high-margin model used by many cloud companies. With a gross margin higher than 70 percent and annual revenue topping A$100 million ($77 million) in 2015, it was the leader in the nascent construction-collaboration software market, which could be worth billions.

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In the middle of last year, Aconex shares started falling after it narrowly missed analysts’ revenue estimates. Sentiment on the stock was also hurt when Jasper and fellow co-founder Rob Phillpot sold some shares — though the pair are still among the top three holders. At the end of January, Aconex plunged 45 percent on one day after it unexpectedly cut its revenue forecast, citing uncertainty in the construction market caused by the Brexit vote and Donald Trump’s election.
From its peak in July through Wednesday’s close, Aconex lost more than half their value. Shares closed down 2 percent on Thursday after falling as much as 5.5 percent.