Evercore ISI maintained its Outperform rating and $38.00 price target on AllianceBernstein Holding L.P. (NYSE: NYSE:AB), a notable firm in the traditional asset management sector. The firm has experienced three consecutive months of minor outflows, prompting Evercore ISI to remove it from the Tactical Outperform List.
Despite this, the outlook for AllianceBernstein remains positive, with no significant legacy issues and several growth engines expected to drive consistent inflows compared to its peers.
AllianceBernstein's growth is attributed to several key areas, including strong high-yield fixed income funds in Asia, active equities for retail investors, private market strategies, municipal separately-managed accounts and mutual funds, and institutional active equities.
While the latter has seen less recent success, it is still outperforming many competitors. The company is also recognized for its expanding profit margins, a result of strategic management decisions such as relocating its headquarters to Tennessee, divesting its lowest-margin business, and focusing on higher-fee alternative investments.
Management's decisive actions over the past years have positioned AllianceBernstein as a rare story of secular margin expansion within the industry. This includes the move of its headquarters from New York City to Tennessee, the spin-off of its lowest margin business, and a shift towards higher fee alternative investments, which now account for 15% of revenue and are projected to increase to 20% by the year 2027.
Additionally, AllianceBernstein is noted for its capital management, boasting the highest yield in its group at over 8% and a commitment to maintaining a stable share count over time.
AllianceBernstein maintained its buy rating by TD Cowen despite a mixed outlook on the August assets under management (AUM) report. While the AUM figures aligned with expectations, the reported flows did not meet the forecasts set by the analyst's model.
Barclays (LON:BARC) also initiated coverage on AllianceBernstein with an Equalweight rating, citing the company's potential for near-term margin expansion.
Recent developments include AllianceBernstein reporting a significant 11% year-over-year increase in AUM, reaching $770 billion, and a 42% surge in gross sales, totaling $31.9 billion.
Despite a $28 million investment loss from a joint venture, the company saw increases in GAAP operating income and earnings per share, up by 6% and 87% respectively.
TD Cowen, on the other hand, raised AllianceBernstein's price target to $39.00 from $36.00, maintaining a Buy rating. The firm's analysts cited a favorable flow and fee rate combination and potential benefits from a shift in investor preferences towards fixed income and value-oriented investments as reasons for the positive outlook.
AllianceBernstein is planning to expand its capabilities in the U.S. retail market, accelerate growth in separately managed accounts, and launch tax-efficient products. These strategic initiatives are expected to leverage the company's distribution advantages in private alternatives.
The company's recent performance and strategic plans indicate a strong commitment to growth and investor return.
InvestingPro Insights
As AllianceBernstein Holding L.P. (NYSE: AB) continues to navigate the asset management landscape, recent data from InvestingPro provides a quantitative lens to complement Evercore ISI's qualitative analysis. With a market capitalization of $3.96 billion and a price-to-earnings (P/E) ratio standing at 11.98, AllianceBernstein presents itself as a company trading at a low P/E ratio relative to near-term earnings growth. This is further evidenced by a PEG ratio of 0.46, indicating potential undervaluation based on earnings growth expectations.
Investors may also find AllianceBernstein's commitment to shareholder returns attractive. The firm not only pays a significant dividend, but it has also maintained dividend payments for 37 consecutive years, showcasing its stability and reliability. The current dividend yield is a robust 8.22%, which is particularly compelling in today's market. Additionally, with a dividend growth of 7.58% over the last twelve months, the company demonstrates its ability to increase shareholder value consistently.
For those seeking more in-depth analysis, InvestingPro offers additional tips on AllianceBernstein, including insights into analyst predictions and profitability metrics. To explore these further, interested readers can visit the dedicated InvestingPro page for AllianceBernstein at https://www.investing.com/pro/AB, which features a comprehensive suite of tools and metrics for informed investment decisions.
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