On Tuesday, Barclays initiated coverage on shares of Invesco Ltd. (NYSE:IVZ), a global investment management firm, assigning an Equal Weight rating to the stock with a price target of $18.00. The new rating reflects the company's recent performance in terms of fund flows and sales but also points out challenges in revenue growth due to a shift towards lower- or no-fee product categories.
Invesco has been noted for its better-than-average flow profile, particularly in recent quarters, showing strength in both active and passive fund offerings. The company has seen improving gross sales, which has been a positive indicator. However, the majority of the sales have been concentrated in lower- or no-fee categories, such as Exchange-Traded Funds (ETFs) and QQQs, which are a line of products offered by Invesco.
Despite the improved sales, Invesco's revenue picture has faced challenges. The mix shift towards products with lower fees has resulted in negative "organic" revenue in recent quarters. Organic revenue is calculated by multiplying net flows by the fee rate. Although there was some positive growth observed in the second quarter of the year, this has been described as somewhat atypical for the company's recent trend.
The Barclays analyst highlighted that the positive growth observed in the second quarter was not the norm for Invesco, indicating that the company's revenue challenges are ongoing. The $18 price target set by Barclays reflects a neutral stance on the stock, suggesting that the firm's current market performance is adequately valued at this level.
In other recent news, Invesco reported robust earnings for the second quarter with a 12% year-over-year increase in assets under management (AUM) reaching over $1.7 trillion. This was driven by record net long-term inflows of $16.7 billion, marking the strongest quarter in over two years.
The firm's operating margin also expanded to 30.9%. These recent developments coincide with a series of analyst upgrades. RBC Capital Markets raised Invesco's price target to $17.00, maintaining a Sector Perform rating.
BofA Securities lifted the price target to $20, keeping a Neutral rating, and Argus increased the stock price target to $19.00, reaffirming a Buy rating. Invesco's financial strategy, including its plans to resume share buybacks, has been positively received. The company has been focusing on expanding its ETF and fixed-income offerings, particularly in international markets such as China and Japan.
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