Goldman Sachs Sees 19% Potential Upside In Affiliated Managers Group

Goldman Sachs’ Alexander Blostein maintained a Buy rating on Affiliated Managers Group, Inc. AMG, while raising the price target from $175 to $190.

Return Potential

Adding the stock to Goldman Sachs’ Americas Conviction List, Blostein mentioned that the stock has 19 percent upside potential. The analyst also mentioned that the price target has been raised to reflect higher estimates and the company’s improved organic growth.

Turnaround On The Cards

According to Blostein, “Following a tough 2H15, we expect AMG's flows to see a sharp turnaround in 1Q which should drive the stock's deeply discounted valuation higher.”

The analyst also pointed out that Affiliated Managers Group’s “relevant” products, defensive margins and opportunities for M&A were likely to help drive more robust long term growth, setting the company apart from its peers.

Retail Flows Improving

In addition, the company’s retail flows, which led to the 2H15 weakness, appear to have reached an inflection point and are tracking at $4 billion quarter to date.

Blostein believes that this improvement has been driven by strong demand for AQR’s mutual funds, along with lower outflows from Yacktman.

The analyst also believes that the institutional channel would improve, due to lower headwinds from SWF, increasing demand for global equities and robust returns.

“AMG’s margins are more defensive than peers given revenue share model, likely leading to outperformance versus peers in 1Q,” Blostein added.

The EPS estimates for 2016, 2017 and 2018 have been raised by an average of 4 percent to reflect improved retail flows.