Morgan Stanley forecasts Magellan share price will sink 35%

The Magellan Financial Group Ltd (ASX: MFG) share price has had a rough trot recently. It has tumbled 33% so far in 2022 and a whopping 73% over the last year.

The stock’s plunge came amid Magellan losing a major contract in December, waving goodbye to its co-founder and star stock-picker Hamish Douglass in March, and recording $52.6 billion in funds under management (FUM) outflows over the last 12 months.

At the time of writing, the Magellan share price is $14.04. And, now, one major broker has tipped it to tumble another 36%.

Let’s take a look at what’s made Morgan Stanley increasingly bearish on the S&P/ASX 200 Index (ASX: XJO) asset management business.

Magellan share price tipped to fall to $9

That’s right, Morgan Stanley has reportedly slapped Magellan shares with a $9 price target amid its increasingly bearish view of the company’s sector.

Morgan Stanley analysts also cut financial year 2023 earnings expectations for the asset management sector by between 10% and 30%, saying they didn’t see much to like, according to reporting in the Australian Financial Review.

And the main reason behind the broker’s pessimism is, perhaps unsurprisingly, outflows. The analysts were quoted as saying:

Investment performance has been improving across the group and there is less passive pressure in Australia than in the US, but growth options are limited across the group and we think a broad recovery to inflows is unlikely.

It’s worth nothing Morgan Stanley’s bearish outlook on Magellan shares isn’t new.

Indeed, the broker had previously tipped the Magellan share price to fall to $11 and marked it with an ‘underweight’ rating, as the Motley Fool Australia’s James Mickleboro reported in May. FUM outflows were also behind its cynical forecast then.  

Magellan had a total of $61.3 billion of FUM at the end of last month. That’s down from $113.9 billion at the same point in 2021.

The post Morgan Stanley forecasts Magellan share price will sink 35% appeared first on The Motley Fool Australia.

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More reading

• Why has the Magellan share price leapt 21% in a week?
• Here are the top 10 ASX shares today
• What market prediction sent the Magellan share price spiking 9% today?
• ‘Important period’: Here’s why the Magellan share price is shedding today
• Is the Magellan share price on course for a recovery in FY23?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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