Source: Sharecast
The investment management firm reported on 1 August that assets under management (AuM) reached a record $152bn in the first six months of the year, up from $143bn at the end of 2022. However, core earnings per share slumped to just 8.9 cents, from 24 cents the year before, due to significantly lower performance fee revenue as the result of the sharp reversal in markets around the March banking crisis.
The shares, trading at 238.8p prior to the results, had dropped to around the 200p level in the three weeks since – a reaction which Citi said "seemed harsh".
"While performance fee headwind remains [a] key near-term focus, we see management fee outlook as resilient, with improving diversification by asset and client mix," the bank said.
In valuation terms, Citi pointed out that the stock currently trades at under eight times forward earnings, more than a 25% discount to the long-term average.
"Our bull-bear analysis indicates shares are pricing in much weaker AuM and performance growth from current levels, which we view as unwarranted for underlying growth potential and client engagement over the medium term. We raise our target price to 270p and reiterate 'buy'."