St James Place (LON: STJ) share price freefall continued this month as concerns about the company’s growth and profitability continued. The stock tumbled to a low of 782p this month, the lowest it has been since November 2020. It has plunged by almost 50% from the highest level on record.
Growth and profitability concerns
St James Place and other UK asset and wealth management companies like Abrdn, Schroders (LON:SDR), and M&G Group have come under pressure in the past few years. Most of them have seen their assets under management (AUM) plummet as the British economy has lost momentum.
St James Place did well in the first half of the year as its total funds under administration rose to £157.6 billion, up by 6% from December. However, its gross inflows were £8 billion while the net inflows were over £3.4 billion. However, its financials were not all that good as its profits retreated.
There are numerous reasons for this crisis, including the rising cost of living, stricter regulations in the UK, Brexit, and the underperformance in the UK equities market. Last year’s mini-budget crisis also had an impact.
St James Place’s performance has been underwhelming, as evidenced by its performance in the first half of the year. Its profit plunged to £161.7 million from the previous year’s £208.2 million.
A key challenge for St James Place is the recent regulations that mandate wealth managers too ‘act to deliver good outcomes for retail customers.’ As a result, the company decided to slash its fees, which will hit its income.
St James Place faces numerous challenges in the near term. While its market cap of £4.6 billion makes it quite a cheap stock, it faces an uphill battle to boost its profitability and assets growth.
St James Place share price forecast
In my last article on St James Place, I warned that the shares would drop further, which was an accurate estimate. The weekly chart shows that this forecast was accurate as the stock dropped below the key support at 862.2p, the lowest swing on October 10th.
St James Place stock price has formed a death cross as the 200-week and 50-week exponential moving averages (EMA) have made a bearish crossover. The Relative Strength Index (RSI) has moved to the oversold level.
Therefore, the outlook for the stock is still bearish, with the next target being the psychological level at 700p. The next key event that will drive the STJ stock price will be the upcoming earnings on October 19th.
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