Is AllianceBernstein Sitting On 'Disruptive Technology'? This Citi Analyst Thinks So

Citi raised its price target on AllianceBernstein Holding LP AB Monday from $32 to $34 and maintained a Buy rating following meetings with management.

Analysts led by William R. Katz suggested the company is "sitting on a ‘disruptive technology'" that could "reshape" the 401(k)/DC market.

Katz indicated that although the technology is in its early phases, the company's recent joint-venture with Morningstar, Inc. MORN could disrupt the "oligopoly" held by T. Rowe Price Group Inc TROW, Fidelity and Vanguard.

Further, the new retirement offering could provide "significant high margin flow potential" while addressing fiduciary issues which have come into focus at the Department of Labor.

Morningstar will supply manager selection in the new technology product while AllianceBernstein will deliver asset allocation, "all in a glide path format with dynamic asset allocation," according to Katz.

The analysts noted that the product would address both the hesitancy of employers to select managers and the fact that employers cannot offer financial advice under ERISA law.

In addition to the new technology, Katz anticipated higher structural margins and raised 2016 EPU estimates from $2.47 to $2.52 and 2017 EPU estimates from $2.80 to $2.91.

The analysts thought that the central risks to achieving the $34 price target were "markets, fixed income exposure in a rising rate environment and lumpy equity flow traction."

AllianceBernstein Holding LP recently traded at $28.75, up 0.38 percent.