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KBW Downgrades WisdomTree Investments To Underperform

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  • Amid volatility, WisdomTree Investments, Inc. (NASDAQ: WETF) shares have lost 56 percent since August 10.
  • Keefe, Bruyette & Woods’ Robert Lee downgraded the rating for the company from Market Perform to Underperform, while reducing the price target from $13.50 to $10.00.
  • Although the company report an in-line quarter, its margins are expected to be under pressure going ahead, Lee stated.

WisdomTree Investments reported its 4Q15 revenue in-line with expectations. On the expense side, lower compensation was offset by higher third-party sharing arrangements and other expenses. AUM at the end of the quarter stood at $52.4bn, which was already known.

Although AUM was up 33 percent y/y, it was down 3 percent q/q. Analyst Robert Lee mentioned that AUM had declined to ~$46.2bn, as of February 5. He added that lower AUM levels, coupled with continued investment spend, are likely to exert pressure on WisdomTree Investments’ margins in 2016.

While demand for currency hedged strategies in general may remain positive over time, competition is intensifying.

Against this scenario, “the magnitude of the DXJ and HEDJ AUM base imposes significant concentration risk on the stock should the strategies fall out of favor (as has been demonstrated in recent months), as it would be difficult for flows into other strategies to have a sizeable impact on revenues and earnings over the near term.” Lee commented.

The EPS estimates for 2016 and 2017 have been reduced from $0.60 to $0.42 and from $0.75 to $0.52 to reflect the 4Q results as well as changes to AUM and expense forecasts to incorporate the current asset levels.

Latest Ratings for WETF

DateFirmActionFromTo
Oct 2019MaintainsEqual-Weight
Feb 2019DowngradesNeutralSell
Dec 2018UpgradesSellNeutral

View More Analyst Ratings for WETF
View the Latest Analyst Ratings

Posted-In: Bruyette & Woods KeefeAnalyst Color Short Ideas Downgrades Price Target Analyst Ratings Trading Ideas

 

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