Berenberg cuts price target on AJ Bell
By Iain Gilbert
Date: Thursday 02 Apr 2020
(Sharecast News) - Analysts at Berenberg lowered their price target on online stockbroker AJ Bell from 280.0p to 230.0p on Thursday, stating the group faced more acute revenue pressure in the current environment than its UK small-to-mid cap platform peers.
Berenberg said that in addition to headwinds from market weakness in assets under management-related fees, AJ Bell was "uniquely exposed" to falling interest rates and stated that consensus downgrades thus far had "failed to recognise this pressure".
"AJ Bell's own guidance on market and interest rate sensitivity implies a revenue headwind in the region of c?12m 2020E, rising to c?25m in 2021E and c?30m in 2022E," said Berenberg.
"Since the end of January, consensus downgrades of ?5m-13m fall short on average of guidance for the market impact alone, implying downgrades have yet to reflect falling interest income at all. We expect further downgrades as consensus adjusts to the current environment."
While the German bank acknowledged that first-quarter platform flows looked like they had been "strong", its analysts noted that AJ Bell's flows were likely to rebase lower as time moved on given that even if customer behaviour is unchanged, flows would still be impacted as the value of portfolios being transferred falls with the market.
Berenberg, which also cut its earnings per share estimates for AJ Bell by roughly 20%, now expects AJ Bell to underperform as analysts' estimates fail to reflect current conditions.
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