Barclays gave a knock to shares in M&G PLC (LON:MNG) on Friday as it downgraded its rating for the fund manager while expressing a preference for peer Phoenix Group Holdings PLC (LON:PHNX), which saw its rating updated.
The global bank cut its stance for M&G – which was spun-out from insurance giant Prudential PLC (LON:PRU) last year – to ‘underweight’ from ‘equal-weight' and reduced its target price to 189p from 202p, with the stock currently trading at 165.65p, down 4% on Thursday’s close.
For Phoenix, Barclays upped its rating to ‘overweight’ from ‘equal-weight’ with an increased target price of 793p from 698p. Phoenix shares edged up 0.3% to 675p.
In a note to clients, the bank’s analysts said: “We believe the market values defensive back books of business and clear positive catalysts, which is the reason we think Phoenix and Prudential have been two of the best performers in UK life YTD. While M&G has a big back book able to cover the dividend, we think the stock lacks meaningful positive catalysts.”
They added: “We expect 1H20 earnings to highlight the fundamental challenges M&G faces and we downgrade to Underweight. By contrast, at asset gatherer peer Phoenix, we expect results to reaffirm upside potential following the acquisition of ReAssure”
The Barclays analysts also said they had cut full-year 2021 earnings estimates for M&G by 14%/15%, leaving them 14%/15% below the consensus.