On Thursday, UBS adjusted its stance on Partners Group Holding AG (PGHN:SW) (OTC: PGPHF), downgrading the stock from Buy to Neutral and slightly reducing the price target to CHF 1,250 from CHF 1,263.
The revision reflects concerns about the global private equity and infrastructure sectors, where transaction activity continues to be subdued with further weakening observed recently. Additionally, the quality of exits is reportedly declining, with a growing proportion involving continuation funds.
UBS notes that the pace of monetary policy easing, which is considered a crucial driver for the industry, remains uncertain. This uncertainty, combined with the current market conditions, is expected to limit near-term earnings growth for Partners Group.
The firm has adjusted its earnings per share (EPS) forecasts for the years 2024 and 2025 downwards by 10% and 7%, respectively, due to lower than anticipated new net money (NNM) expectations and significantly reduced performance fee projections.
The investment firm's decision comes despite some positive developments, such as the opening of financing markets and the initial public offering (IPO) market. However, these factors have not been sufficient to counteract the overall weak transaction activity within the sector.
The adjustment in Partners Group's price target is primarily attributed to the revised EPS estimates, although partially offset by the application of a discounted cash flow (DCF) model that has been rolled forward.
UBS points out that the share price of Partners Group has seen a substantial increase of 46% over the past year, bringing the valuation in line with long-term averages based on a 12-month forward price-to-earnings (PE) ratio.
Given this context, UBS anticipates limited near-term upside for the stock, leading to the decision to downgrade the rating to Neutral.
In other recent news, Partners Group Holding AG has been a topic of interest following its full year 2023 results and an updated outlook from JPMorgan (NYSE:JPM).
The investment banking firm raised its price target for Partners Group to CHF1,252, a 14% increase from the previous target, while maintaining a Neutral rating on the stock. This revision is primarily due to a higher Price/Funds from Operations multiple of 28x, up from 25x.
In spite of a downward revision of the 2024 estimated earnings per share by 7%, the estimates for the 2025-26 adjusted EPS have been increased by approximately 6% on average. This increase is driven by higher anticipated management fees, supported by an updated Assets under Management forecast.
In addition to the financial updates, Partners Group also outlined a robust private market growth strategy in its 2023 earnings call. The company reported a strong performance with $18 billion in assets raised and an 8% growth in asset center management.
The firm reaffirmed its fundraising guidance at $20 billion to $25 billion, expressing confidence in leveraging its offerings and client relationships to capture market opportunities.
These are recent developments that highlight the company's performance and future plans, providing valuable insights for investors.
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