Citi Says Waddell Has Gone From 'Flow Mo to No Mo'

Shares of Waddell & Reed Financial WDR are likely to come under fire Thursday after a Citi research report called the company “From Flow Mo’ To No Mo’.” The stock was downgraded from buy to neutral and the price target cut from $71 to $66.

Citi analyst William Katz writes, “We believe the outlook for High Income and Asset Strategy flows have deteriorated following recent PM exits. Unfortunately, these two funds account for ~40% of AUM and ~48% of flows 2014-YTD. The High Income PM termination seems problematic given the PM only recently replaced the outgoing PM in November 2013; and recent performance trends have been weak.”

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Along with lower EPS estimates, Katz cites the departure of key management as a bearish catalyst.

The $66 price target was derived with 15 times PE multiple on three percent second half 2014 organic growth and five percent organic 2015 growth.

Shares of Waddell & Reed Financial closed at $60.84 Wednesday.