Why Are Star Entertainment (SGR), Lovisa (LOV), and GQG Partners (GQG) Falling Today

By Jason McIntosh | 9 January 2025

Investors woke up to a challenging day on January 9, 2025, as several ASX-listed stocks faced steep declines. Star Entertainment Group Ltd (ASX: SGR), Lovisa Holdings Ltd (ASX: LOV), and GQG Partners Inc (ASX: GQG) all saw significant drops in their share prices, rattling investors.

Let’s break down the reasons behind the sell-off:

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Star Entertainment Group Ltd (ASX: SGR)

Star Entertainment’s shares crashed by 33% to a record low of 13 cents, leaving many investors stunned. The company disclosed a worrying cash crunch, with its available cash balance dropping to just $79 million, compared to $149 million at the end of September 2024.

The casino operator highlighted multiple factors behind the cash burn, including:

• Difficult trading conditions impacting revenue.
• Regulatory fees and fines, compounding financial stress.
• Essential capital expenditure, which has weighed heavily on its balance sheet.

Star is also struggling to meet the conditions needed to draw down an additional $100 million from its debt facility, further eroding investor confidence.

The Technical Picture for SGR

From a technical perspective, SGR has been trading below its declining 50-day and 100-day moving averages for nearly three years. This is a hallmark of a long-term downtrend. Stocks that persist below declining moving averages carry elevated risk, as they lack the upward momentum needed to attract sustained buying interest.

For investors, this scenario underscores the importance of having a risk management strategy, such as employing stop-losses, to protect capital. A trailing stop, for example, would have allowed investors to exit positions earlier in SGR’s decline, preserving funds for better opportunities.

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Lovisa Holdings Ltd (ASX: LOV)

Shares of the fashion jewelry retailer fell 9% to $27.10, marking another challenging day for the company. The sell-off was primarily driven by broker downgrades:

• UBS downgraded LOV to a sell rating, with a price target of $27.00, citing downside risks to earnings estimates.
• Jefferies also cut its rating from buy to hold, further fueling the negative sentiment.

Additionally, reports of a lawsuit involving Lovisa’s former CEO, now operating a competing chain, may have added to investor concerns.

The Technical Picture for LOV

LOV has been consolidating below its declining moving averages (50-day and 100-day) since early November 2024. From a technical perspective, this opens a window of vulnerability, as stocks trading below declining moving averages often struggle to regain upward momentum.

This technical weakness, combined with recent downgrades and external challenges, highlights the importance of aligning investments with stocks that are in uptrends. When trends turn lower, risk management tools like stop-losses can help protect capital.

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GQG Partners Inc (ASX: GQG)

GQG Partners saw its shares remain under pressure, declining further this week. The latest update on funds under management (FUM) fell short of market expectations, reporting $153 billion versus the consensus estimate of $164 billion.

Weaker-than-expected flows and market contributions also prompted analysts to downgrade earnings forecasts for the coming years. Despite these headwinds, Goldman Sachs maintains a buy rating on GQG, with a price target of $3.00, citing the stock’s potential undervaluation.

The Technical Picture for GQG

Technically, GQG shares broke down in mid-December 2024 and have since remained below their declining moving averages. This prolonged weakness in the stock aligns with a broader risk of further downside pressure. Much like Lovisa, GQG’s inability to recover above its moving averages signals vulnerability and the potential for further declines.

For investors, this situation underscores the importance of owning stocks in uptrends. Motion Trader’s strategy focuses on identifying stocks with upward momentum and using stop-losses to exit positions when trends reverse.

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The Importance of Risk Management and Technical Analysis

The sharp declines in SGR, LOV, and GQG are stark reminders of the importance of having a robust risk management strategy. While all investing carries an element of risk, tools like trailing stops and adhering to a rules-based approach can help limit losses and preserve capital when market conditions deteriorate.

At Motion Trader, our focus is on helping investors stay disciplined with a systematic, rules-based approach. This includes using stop-losses to manage risk and identifying stocks in uptrends to help maximise profit potential. By avoiding stocks trading below declining moving averages — like SGR, LOV, and GQG — investors can potentially reduce their exposure to higher-risk scenarios and increase the odds of long-term success.

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Jason McIntosh | Founder, Motion Trader

Jason’s professional trading career began over 3 decades ago. He’s a founder of two stock advisory firms, a listed funds management business, and has helped thousands of investors navigate the stock market. Click here to read Jason’s incredible story of, at age 20, sitting alongside some of the world’s greatest traders (and the life changing experience that came with that).