The Macquarie Group Ltd (ASX: MQG) share price zoomed ahead of the ASX big four bank shares over the last few months, but some experts think its outlook is less certain.
Shares in the home-grown investment bank jumped over 13% in the past two months and closed at $203.43 yesterday.
Macquarie Group share price beating its peers
This compares with the National Australia Bank Ltd (ASX: NAB) share price gain of just under 11%. NAB was the strongest performer among the big four banks.
The Commonwealth Bank of Australia (ASX: CBA) share price added 8%, while the Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) share prices advanced around 6% each.
Outlook getting cloudier
But this could be as good as it gets for the Macquarie Group share price, according to UBS. The broker initiated coverage on its shares with a neutral recommendation and warned of downside risk to its earnings per share (EPS).
"One of the attractions of the MQG investment case is the diverse product and country mix split between annuity and risk based earnings streams, adding stability to the group's earnings profile," said UBS.
"MQG's revenue in the Macquarie Capital division (20% of group) appears elevated."
Macquarie's earnings risk building
This is because of investment income and gains on asset sales. Further, high merger and acquisition advisory fees and lower credit impairment charges also bolstered the division's revenue.
"As activity levels stabilize, we anticipate some revenue normalisation and a high water mark level for division profits," added UBS.
"CGM (40% of group) also has revenue streams which are episodic and difficult to forecast."
CGM is the group's Commodities and Global Markets division. It is benefitting from very strong commodity prices and high levels of volatility due to the war in Ukraine and other COVID-induced supply chain disruptions.
Reasons to like the Macquarie Group share price
However, UBS does acknowledge several positives that could attract investors to the Macquarie Group's share price.
"The group's value proposition to stakeholders is differentiated among global [investment banks], with a leading position in infrastructure investments and renewable energy, complimented [sic] by its top 3 global commodities franchise," said the broker.
"Tailwinds in alternative assets, integrated capabilities in renewables advisory, and a history of stable earnings and prudent capital management are all positives."
What are Macquarie shares worth?
Unfortunately, from UBS' perspective, the good news is already priced into the Macquarie Group share price.
The broker's 12-month price target on the shares is $205 a pop. That leaves little room for price appreciation.
On the other hand, not all brokers think the upside for Macquarie is lacklustre. JP Morgan is urging investors to buy Macquarie Group shares ahead of the company's profit results on Friday.
In early trade on Wednesday, Macquarie shares are climbing nearly 1% at $205.42.
