On Monday, Goldman Sachs analyst Alexander Blostein revised the rating of Franklin Resources (NYSE:BEN), raising it from Sell to Neutral, with a new price target set at $22.00. The adjustment reflects a shift in perspective regarding the company's financial outlook and market performance. According to InvestingPro data, the stock currently shows signs of being undervalued, with a FAIR overall Financial Health Score of 2.28 out of 5.
Blostein noted that Franklin Resources has seen significant organic decline over time, impacting earnings, price-to-earnings (P/E) ratio, and share price. Despite these challenges, the expectation is that the rate of deterioration will slow down throughout 2025.
The current valuation metrics, including a P/E ratio of 24.04, EV/EBITDA of 6.35, and a free cash flow yield of 7%, combined with an attractive 6.27% dividend yield, suggest limited downside potential. Notably, InvestingPro analysis reveals the company has maintained dividend payments for 44 consecutive years, with several additional insights available to subscribers.
Franklin Resources is anticipated to continue encountering growth obstacles in many of its traditional liquid strategies, despite posting 8.01% revenue growth in the last twelve months. Nonetheless, the company's strategic expansion into private markets, which now represents about 20% of management fees, is expected to provide some protection against these headwinds. The firm's move is seen as a positive step, potentially enhancing organic base fee growth due to favorable industry trends and higher fee rates in the private markets sector.
The new 12-month price target of $22 indicates a 7% increase from current levels, based on a projected 9 times P/E ratio for the fifth to eighth quarters ahead. This updated target reflects Goldman Sachs' revised outlook on Franklin Resources' stock performance over the coming year. Current analyst targets range from $19 to $22.50, with detailed analysis and additional metrics available in the comprehensive Pro Research Report on InvestingPro.
In other recent news, Franklin Templeton reported a decrease in assets under management (AUM) to $1.63 trillion as of October 2024, down from $1.68 trillion in September. This decline was attributed to negative market conditions and significant long-term net outflows, including a substantial $17.8 billion from its subsidiary Western Asset Management. In response to these challenges, TD Cowen adjusted the company's outlook, reducing the price target from $20.00 to $18.50 and maintaining a Hold rating on Franklin Templeton's shares.
Despite these difficulties, Franklin Templeton revealed a strategic shift during its recent earnings call. The company intends to raise $100 billion in private markets over the next five years and significantly expand its ETF and Canvas AUM. This move is part of the firm's efforts to improve client services and operational efficiency by investing in technology.
However, Franklin Templeton's financial results are preliminary and subject to risks and uncertainties that could cause actual results to differ materially from expectations. The company advises investors to regularly review the Investor Relations and News Center sections of its website for significant updates.
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