Is it possible the AMP Limited (ASX: AMP) share price can rise more than 10% and reach $1.25 by Christmas?
It may be useful to know that a price target is where the broker estimates the business will be valued in 12 months from now. So, while the AMP share price could reach that target by Christmas, the broker is only estimating where AMP will be a year from now.
Which broker thinks the AMP share price will reach $1.25?
It’s Citi that thinks AMP shares can rise by 10%. However, the broker doesn’t rate the financial business as a buy, just rating it as a hold.
Citi believes AMP can go through a large transformation and become more profitable as the business changes.
What is the financial company doing?
A couple of months ago it reported its FY21 half-year result.
It said there was an improved performance, with a recovery in economic and market conditions, as well as the ongoing transformation strategy, resulting in a 57% increase in underlying earnings.
Half-year underlying net profit increased from $115 million to $181 million. This reflected higher investment income, a “strong” cost performance, and increased earnings in AMP Bank, which benefited from the release of credit loss provisions.
In terms of restructuring the business, it said it has made a “significant” step forward in the reshaping of the implementation of a new service model for aligned advice and conclusion of the ‘buyer of last resort’ arrangements from the end of 2021.
AMP also said demerger plans are on track. The sale of the Global Equities and Fixed Income (GEFI) business has been agreed and the Multi Asset Group transfer is underway. The internal operational separation is targeted by the end of FY21, with the demerger to complete in the first half of FY22.
The valuation on the AMP share price
According to Citi, AMP shares are currently valued at under 11x FY21’s estimated earnings.
It’s then expecting profit to increase in FY22. So, that puts the AMP share price at under 10x FY23’s estimated earnings.
The broker also thinks AMP could pay a dividend in FY22 of $0.05 per share. That would translate to a forward dividend yield of 4.5%.
However, there are also some brokers that don’t believe the AMP share price is going to move much over the next year. UBS is one of those brokers, with a price target of $1.14. That’s almost the same price that it’s at right now. UBS notes the ongoing outflows that AMP is experiencing.
UBS doesn’t think these problems are going to be resolved in the rest of the 2021 financial year, though it’s monitoring what could happen with/after the demerger.