Canaccord cuts Jupiter to 'hold', slashes target price by 58%

2nd Nov 2023 10:17

(Sharecast News) - Canaccord Genuity has downgraded Jupiter Fund Management from 'buy' to 'hold' and more than halved its target price on the stock, saying that rising competitive pressures are exacerbating ongoing market challenges.

The broker slashed its target price from 168p to just 70p for the stock, which was up 5.6% at 84.1p on Thursday morning.

"Previously we identified scope for optimism with respect to Jupiter, led by the stabilisation of quarterly retail net outflows (albeit no obvious near-term prospect of net inflows), and the positive momentum in the institutional channel. However, we now see a challenged earnings outlook," Canaccord said in a research note.

The broker is forecasting a compound annual growth rate in underlying earnings per share of -12% from 2022 to 2025, compared with its previous forecast of +7%.

The reasons for this downgrade are: additional pressures on net management fee margins due to changes in its tiered fee structure; competitive cost pressures as a result of incentivising and retaining fund managers whilst average assets under management aren't growing; and general ongoing challenging conditions with no net inflows expected next year.

"The sector is suffering from structural challenges, with net management fee margin compression being a key driver. Further, the macro operating environment, is now fundamentally different from the past 10 years, with higher rates and therefore higher hurdle rates influencing capital allocation decisions," Canaccord said.