One of the worst performers on the S&P/ASX 200 index on Thursday has been the Magellan Financial Group Ltd (ASX: MFG) share price.
In afternoon trade the fund manager's shares are down 5.5% to $56.14.
Despite this sizeable decline, Magellan's shares are up a remarkable 140% since the start of the year.
Why is the Magellan share price under pressure today?
Investors have been hitting the sell button on Thursday after the fund manager was the subject of a broker note out of the Macquarie equities desk.
According to the note, its analysts have downgraded Magellan's shares to an underperform rating from neutral.
One small positive, though, was that Macquarie has lifted its price target on the company's shares by around 15% to $45.00.
However, this still implies potential downside of almost 20% for its shares over the next 12 months, even after accounting for today's sizeable decline.
Why has Macquarie downgraded Magellan's shares?
Although Macquarie has acknowledged that Magellan has been a strong performer this year and achieved solid fund inflows at a time when others, such as Perpetual Limited (ASX: PPT) have been bleeding funds, it believes that its shares have run too hard and are now overvalued.
Based on the broker's forecast for earnings per share of $2.01 in FY 2019, Magellan's shares are changing hands at 28x estimated full year earnings. So it may have a point.
Incidentally, Macquarie is also bearish on Perpetual. It has retained its underperform rating and trimmed the price target on its shares to $36.00 after it reported its ninth quarter of net fund outflows in a row.
Elsewhere, the broker has a neutral rating and $4.65 price target on the shares of rival Platinum Asset Management Ltd (ASX: PTM) and an outperform rating and $8.75 price target on the shares of Pendal Group Ltd (ASX: PDL).
