On Wednesday, Goldman Sachs adjusted its stance on Ameriprise Financial (NYSE:AMP (OTC:AMLTF)), downgrading the stock from Buy to Neutral and setting a price target of $476.00. The revision follows a notable year-to-date increase in Ameriprise's stock value, which has risen by approximately 23%.
The downgrade was attributed to a more balanced risk/reward outlook for Ameriprise, as Goldman Sachs anticipates challenges to earnings per share (EPS) growth and sees limited potential for price-to-earnings (P/E) ratio expansion.
The firm identified specific concerns, including downside risks to cash revenues within Ameriprise's Asset Wealth Management (AWM) segment.
Analysts at Goldman Sachs project that cash revenues will not remain flat as consensus estimates suggest, due to expected lower floating balances and a less likely benefit from the repricing of fixed maturities at the bank, given current forward curves.
Goldman Sachs also pointed out potential risks to the sustainability of AWM's margins into 2025 if cash revenues decline. Additionally, the firm noted Ameriprise's valuation at a premium relative to its sum of the parts (SOTP) multiple. Ameriprise trades at approximately 12 times next twelve months (NTM) P/E, compared to an 11 times multiple implied by its peers, despite what Goldman Sachs considers an undifferentiated organic growth profile.
The revised EPS estimates for Ameriprise for the years 2025 and 2026 are $37.80 and $42.09, respectively, which align closely with the consensus. Since being added to the Americas Buy List on January 2, 2024, Ameriprise has outperformed the S&P 500, with its stock price increasing 23% compared to the S&P 500's 21% gain.
In other recent news, Ameriprise Financial has reported strong Q2 financial performance, with record revenues of $4.2 billion and a 17% year-over-year increase in earnings per share to $8.72. Assets under management and administration have also grown by 12% to reach $1.4 trillion. RBC Capital Markets has highlighted Ameriprise's strong fundamentals and has adjusted their outlook on the company's stock, increasing the price target to $500 from the previous $487.
In addition to financial performance, Ameriprise Financial is currently involved in a legal dispute with LPL Financial (NASDAQ:LPLA), accusing the latter of misusing confidential client data. This lawsuit comes amid an industry known for intense competition and frequent legal disputes over trade secrets.
On another note, Ameriprise Financial, along with several other Wall Street firms, has agreed to pay a substantial penalty for violating recordkeeping rules. This is part of a broader enforcement initiative by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission.
InvestingPro Insights
In light of the recent downgrade by Goldman Sachs, investors may find additional context from InvestingPro useful. Ameriprise Financial has exhibited a robust track record of increasing its dividends, having done so for 19 consecutive years, which could reassure income-focused shareholders about the company's commitment to returning value. This is underscored by the fact that Ameriprise has maintained dividend payments for two decades, a testament to its financial stability and shareholder-friendly policies.
Despite concerns raised about the potential for earnings challenges, Ameriprise's financial health appears solid with liquid assets surpassing short-term obligations. This liquidity indicates a strong position to meet immediate financial commitments. Moreover, Ameriprise's stock is trading near its 52-week high, reflecting investor confidence and market sentiment that may have contributed to the stock's year-to-date performance. It's important to note that seven analysts have revised their earnings downwards for the upcoming period, which suggests that investors should keep an eye on future earnings reports and market trends.
InvestingPro data shows a market capitalization of $45.6 billion, with a P/E ratio of 15.63, slightly above the industry average. The company's revenue growth over the last twelve months as of Q2 2024 stands at 12.55%, indicating a healthy top-line expansion. Investors should also consider the company's Price / Book multiple of 9.11 in their valuation analysis, as it trades at a premium compared to some of its peers.
For those interested in a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/AMP, providing further insights into Ameriprise Financial's performance and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.