[ad_1]
On Wednesday, Redburn-Atlantic adjusted its stance on Morningstar (NASDAQ:MORN), changing the stock’s rating from Buy to Neutral. The firm set a price target for Morningstar at $340.00, citing multiple factors influencing the decision.
The analyst at Redburn-Atlantic noted that although Morningstar’s management has taken decisive action on reducing headcount and controlling expense growth, the company is facing its slowest licenced-based revenue growth since 2019. Additionally, productivity was reported to be lower when compared to industry peers.
The firm acknowledged that investors have positively received Morningstar’s efforts to manage expenses amid cyclical revenue challenges. However, the analyst pointed out that there is a need for Morningstar’s management to invest further in order to boost recurring revenue growth and improve returns.
The recent strategic alliance with AssetMark, a wealth platform provider, and the appreciation in global equity markets have led to upgrades in forecasts, but the firm remains cautious.
Redburn-Atlantic’s caution stems from the potential period of reinvestment that Morningstar is entering, which is expected to impact free cash flow (FCF) and returns. The firm also expressed concerns over the approaching period in 2025 when Morningstar will begin to face tougher comparisons on transaction and asset-based revenues.
Despite ongoing tailwinds in its credit rating agency, Morningstar DBRS, and Morningstar Retirement business, the firm advises a conservative stance for investors considering Morningstar stock.
The analyst concluded with a forward-looking statement, emphasizing that while strategic partnerships and market appreciation have provided some positive forecast updates, the anticipated reinvestment phase and challenging comparisons in the coming years warrant a more neutral recommendation for Morningstar shares at this time.
In other recent news, Morningstar has seen significant developments. UBS has initiated coverage on Morningstar, assigning a Buy rating based on favorable market conditions and growth opportunities. The firm’s analysis suggests potential for significant earnings improvement, with a forecast for Morningstar’s earnings per share in 2026 standing at $11.09, a figure 17% higher than the consensus among published analysts.
Additionally, Morningstar has maintained its quarterly dividend at 40.5 cents per share, continuing its previous financial strategy. The company has also disclosed a detailed investor Q&A in its latest SEC filing, demonstrating its commitment to transparency.
In a strategic move, Morningstar Wealth, a division of Morningstar, has forged a strategic alliance with AssetMark, Inc., involving AssetMark’s acquisition of approximately $12 billion in assets from Morningstar Wealth’s Turnkey Asset Management Platform. Morningstar Wealth will serve as a third-party strategist on the AssetMark platform, broadening its investment services.
Despite these positive developments, Morningstar has acknowledged potential risks and uncertainties, such as maintaining brand reputation, mitigating cybersecurity threats, and adapting to regulatory changes. These recent developments highlight Morningstar’s ongoing efforts to enhance services for financial advisors and clients, as well as its commitment to shareholder transparency.
InvestingPro Insights
While Redburn-Atlantic has shifted to a neutral stance on Morningstar (NASDAQ:MORN), recent data from InvestingPro offers additional context to the company’s financial position. Morningstar’s market capitalization stands at $14.36 billion, with a P/E ratio of 57.78, indicating that investors are willing to pay a premium for the company’s earnings. This aligns with the InvestingPro Tip that Morningstar is “Trading at a high earnings multiple.”
Despite the concerns raised about slowing revenue growth, InvestingPro data shows that Morningstar’s revenue grew by 12.52% over the last twelve months, with quarterly revenue growth of 13.31% in Q2 2024. This suggests that while growth may be slower compared to previous years, it remains substantial.
Another InvestingPro Tip highlights that Morningstar “Has maintained dividend payments for 15 consecutive years,” which may appeal to income-focused investors. The company’s dividend yield is currently 0.48%, with a dividend growth of 8.0% over the last twelve months.
It’s worth noting that Morningstar is “Trading near 52-week high,” as indicated by another InvestingPro Tip. This could support Redburn-Atlantic’s decision to move to a neutral rating, suggesting that much of the company’s positive outlook may already be priced in.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Morningstar, providing a broader perspective on the company’s financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
[ad_2]
Source link