On Wednesday, Deutsche Bank raised its rating for Man Group Plc. (EMG:LN) (OTC: MNGPY), shifting from Hold to Buy. The price target for the asset management firm was also adjusted, now set at GBP2.80, a decrease from the previous GBP3.25.
The firm's analyst pointed to a modest recovery in investment performance during September, after a roughly six-month period of more challenging conditions. This period had impacted short-term performance fees and expectations for share buybacks, with the share price declining by 24% since its peak in April 2024. The analyst noted that the current share price does not fully reflect the potential value of future performance fees.
The update comes ahead of Man Group's third-quarter update scheduled for October 17, 2024. Deutsche Bank's analysis indicates a discrepancy between the share price movement and the earnings per share (EPS) changes estimated for the fiscal year 2024. While the management fee EPS has seen a 6% reduction since April, the performance fee EPS has dropped by 43%, leading to an overall EPS decrease of 23%.
Deutsche Bank's decision to upgrade the stock to Buy from Hold is based on the significant share price movement since April 2024, which the analyst believes has resulted in the share price inadequately accounting for future performance fees. This suggests a potential undervaluation of Man Group's shares, providing an opportunity for investment as reflected in the new Buy rating.
In other recent news, Deutsche Bank has adjusted its position on Man Group Plc, downgrading the stock from Buy to Hold, following the company's first-half 2024 results. The bank lowered the price target to £2.80 from the previous £3.25, citing concerns over weakening investment performance and a significant anticipated redemption in the third quarter. Moreover, a decline in run-rate revenue margins and emerging cost pressures were noted.
This shift in recommendation reflects increasing risks associated with performance fees, capital flows, and potential share buybacks, attributed to the deteriorating short-term investment performance.
Deutsche Bank's revised outlook highlights the challenges faced by Man Group in the near term, particularly regarding its ability to generate performance fees and maintain investor confidence amidst forecasted redemptions. These concerns have been incorporated into the bank's updated financial projections for the company. These are among the recent developments for Man Group.
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