On Thursday, Morgan Stanley adjusted its stance on DWS Group GmbH & Co KGaA (DWS:GR), downgrading the stock from Overweight to Equalweight. The firm also revised its price target downward to EUR 42.00 from the previous EUR 46.60. The change in rating reflects a reassessment of the risk/reward profile for DWS Group, considering recent developments and future expectations.
According to the firm, the decision comes after the completion of DWS's €800 million excess capital return. Additionally, Morgan Stanley anticipates ongoing challenges within DWS's Real estate franchise. The analyst also pointed to expected lower margin outflows for the second quarter of 2024, as indicated during the company's Annual General Meeting (AGM).
Despite these concerns, the analyst acknowledged the continued success of DWS's ETF business, which has been benefiting from the demand for lower cost beta products. However, the recalibration of the price target is based on a reduced target multiple of 9 times the estimated earnings for 2025. This adjustment aligns DWS Group's valuation with the current average of the European sector.
The new price target of EUR 42.00, despite being lower than the previous target, still suggests a potential upside of approximately 25% from the current levels. This estimation is based on the firm's projections and the recent performance of the stock within the market.
In summary, Morgan Stanley's revised outlook on DWS Group balances the positive impacts from the ETF segment against the headwinds facing other parts of the business. The firm's analysis indicates a more neutral position on the stock's future performance potential.
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