Jupiter Fund Management PLC (LON:JUP) has been downgraded to ‘sell’ from ‘hold’ by analysts at Berenberg as the broker warned “sustained market volatility” will make it harder for the firm to face other challenges.
In a note which also cut its target price for Jupiter to 262p from 367p, Berenberg said the asset manager’s retail focus, high equity exposure and low ‘stickiness’ (long-term investors) meant it was “particularly susceptible to a deterioration in investor sentiment and market volatility”.
READ: Jupiter profits fall less than expected after exit of star manager
Analysts also said that Jupiter’s £370mln acquisition of rival asset manager Merian Global would “do little” to address the company’s strategic challenges such as the “growing concentration of distribution channels in the UK”.
“With [merger & acquisition] optionality seemingly “spent” on the Merian deal, Jupiter is more likely to opt for organic solutions to these challenges (expansion of Jupiter’s institutional efforts, possibly). At best, these will take time”, Berenberg said.
The broker added that Jupiter’s expectation of earnings per share (EPS) growth in the “low to mid-teens” from the Merian acquisition was likely to be offset almost entirely by “market declines and fund outflows”.
“The combined Jupiter/Merian business trades at only a 10% discount to the median European asset manager…We believe this is insufficient to reward investors for the risks”, they concluded.
Jupiter’s shares slumped 6.6% to 277.7p.