The Magellan Financial Group Ltd (ASX: MFG) share price has been devastated in recent years. It's currently more than 85% lower than the all-time high it posted back in February 2020.
But there could still be hope for the S&P/ASX 200 Index (ASX: XJO) funds management business.
One top broker has reportedly doubled down on the stock, upgrading it to a buy ahead of the release of the company's half-year earnings.
And the market appears to be bidding the Magellan share price higher in response. Right now, the stock is trading at $9.40 – 6.58% higher than its previous close.
For comparison, the ASX 200 is down 0.86% at the time of writing.
Let's take a closer look at what one broker thinks the future could hold for the embattled financials giant.
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Magellan share price rockets 7% amid broker upgrade
The Magellan share price is having a day in the sun amid reports UBS has upped its expectations for the stock. The broker has slapped a buy rating following years of tipping it a sell, the Australian Financial Review reports.
The stock has also been predicted to climb to $10. That represents a potential 6.4% upside on its current level.
It comes after the fund manager revealed another $500 million outflow for the month of January.
Though, thanks to favourable market movements, it ended the month with $46.2 billion of funds under management (FUM) – a 2% month-on-month improvement. Of that, $19 billion was retail and the other $27.2 billion was institutional.
And UBS is said to see value at such levels. The broker believes its FUM will fall before steadying at around $40 billion. Analysts said, courtesy of the publication:
Performance has remained elusive given style-headwinds, however the Global one-year track record is -3.3% vs benchmark and assuming 2% [per annum] alpha going forward would see the three-year track record hit benchmark returns by late 2024.
The broker also reportedly likes Magellan's balance sheet, saying cash and investments are behind around half of its market capitalisation. That's said to imply the company (excluding C&I) is trading on around 8 times sustainable earnings with a 12% fully franked dividend yield.
No doubt more eyes will be on the Magellan share price when the fund manager releases its earnings for the first half of financial year 2023 tomorrow.
