The AMP Limited (ASX: AMP) share price is down 14.1% in the last fortnight. Shares in the Aussie wealth manager have been under pressure as media scrutiny and culture issues weigh on investors’ minds.
There’s no doubt that AMP has some challenges in the months and years ahead. But does it make sense to buy in at $1.40 per share?
Why the AMP share price is under pressure
For one thing, there has been a significant management overhaul in recent weeks. The wealth manager’s new-look board has been overhauled once again after bringing in David Murray as Chairman following the 2018 Royal Commission.
AMP’s chairman and another board member have now resigned. That paves the way for AMP to try and once again rehabilitate the wealth manager’s image after the controversy surrounding Boe Pahari’s appointment as Head of AMP Capital.
However, it’s more than just the management headaches and culture issues weighing on the AMP share price. A soft August earnings result has investors wondering just how long to hold onto the company’s shares.
The coronavirus pandemic weighed on earnings with cash outflows of $4.4 billion seeing Australian wealth earnings fall 42.7% lower.
The group does remain well capitalised with $1.4 billion in surplus capital above target requirements despite a 40% fall in AMP Capital earnings and a 29.6% drop in AMP Bank earnings.
For reference, the AMP share price is trading at $1.40 per share. That’s down 27.1% for the year and 74.2% since March 2018 in the pre-Royal Commission days.
Is now the time to buy AMP?
I think AMP is one of the riskier buys on the ASX right now. The combination of soft earnings and widespread cultural issues have wreaked havoc on the company’s valuations.
The AMP share price currently trades at an astonishing 115.4 price to earnings (P/E) ratio. That doesn’t exactly scream good value to a prudent investor.
However, a new management team and refined strategy could be the key. If we see a better than expected economic recovery from COVID-19, AMP could be well placed to surprise in August next year.
Given all of that, maybe the AMP share price is worth a look at $1.40 per share as a very speculative buy.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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