Tel Aviv Stock Exchange Stock Plummets Despite Profit Surge
Translated & summarized from Calcalist by baba
The Tel Aviv Stock Exchange (TASE) stock fell 9% after releasing its third-quarter 2026 financial results, despite a 37% year-over-year increase in net profit. Investors were disappointed by a sequential decline in profits and revenues, and a slowdown in trading volumes and IPOs. Analysts attribute the stock's drop to high expectations following a prior 77% surge, with the P/E ratio remaining elevated. The TASE is pursuing an ambitious strategic plan and potential international acquisitions.
The story in 5 lines · by baba
- TASE stock dropped 9%, losing 1.1 billion shekels after reporting a 37% profit increase.
- Third-quarter net profit was 68.3 million shekels, but profits declined sequentially from earlier 2026 quarters.
- Trading volumes and IPO fundraising saw significant slowdowns compared to the first half of 2026.
- Analysts cite high investor expectations and an elevated P/E ratio as reasons for the stock's fall.
- TASE is implementing an ambitious 2027-2031 strategic plan and exploring international acquisitions.
The Tel Aviv Stock Exchange (TASE) stock experienced a significant drop of up to 9% on Wednesday, erasing approximately 1.1 billion shekels from its market value. This decline followed the release of the TASE's third-quarter financial reports for 2026. Despite reporting a 37% surge in net profit compared to the same period last year, investors appeared unimpressed, especially after the stock had already climbed 77% year-to-date, reaching a market cap of 13.5 billion shekels before the report.
The TASE reported a net profit of 68.3 million shekels for the third quarter, up from 50 million shekels in the prior year. Revenues increased by 19% to 175.3 million shekels, while expenses rose by a more modest 4% to 87.6 million shekels. However, a comparison with earlier quarters of 2026 revealed a slowdown: net profit decreased from 77 million shekels in the first quarter and 79 million shekels in the second. Third-quarter revenues were also lower than those recorded in the first two quarters, indicating a weakening growth rate quarter-over-quarter, even as year-over-year figures remained positive.
This deceleration is partly attributed to a moderation in trading volumes. The average daily trading volume for stocks and convertible securities, excluding ETFs and foreign funds, was around 3.6 billion shekels in the third quarter. While this represents a 13.2% increase from the previous year, it was significantly lower than the average seen in the first half of the year. The IPO market also saw a slowdown, with the number of public offerings dropping from 26 in the third quarter of the previous year to just 10, and the amount raised plummeting by 68% from 6 billion shekels to 1.9 billion shekels.
Market analysts suggest the sharp stock decline reflects high investor expectations fueled by the stock's prior surge. The TASE's price-to-earnings (P/E) ratio, which stood at 52 before trading and dropped to 48 after the fall, remains very high, comparable to tech stocks with aggressive growth forecasts. Investors are now focused on what will drive future profit growth to justify the current valuation, especially since this is the second consecutive quarter where the TASE's results have fallen short of expectations.
Despite the current market sentiment, the TASE approved an ambitious strategic plan for 2027-2031 in September, aiming to expand international operations, develop new revenue streams, and upgrade technological infrastructure. This plan was initially met with enthusiasm, boosting the stock by 15% upon its announcement. Analysts remain cautiously optimistic, noting ongoing discussions to acquire parts of the Cyprus Stock Exchange and suggesting that the TASE's management may still have surprises in store.
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