Are AMP shares worth keeping?

Here are some factors to consider.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • AMP shares have been sold off heavily in the past five years
  • One expert now believes there are problems in AMP's fundamentals
  • But despite this, AMP is buying back its own shares, which could signal management believes they'll be worth more in the future

The AMP Ltd (ASX: AMP) share price is down 76% over the past five years and a staggering 91% since the company's shares first traded in January 1999.

By comparison, the S&P/ASX 200 Financials Index (ASX: XFJ) has dropped 4.84% over the past five years, with AMP's financial sector peers pulling well ahead of it.

No doubt, it's been a hard road for the financial services provider but now an expert has pointed out some major flaws in AMP's fundamentals.

A woman sits at a computer with a quizzical look on her face with eyerows raised while looking into a computer, as though she is resigned to some not pleasing news.

Image source: Getty Images

What did the expert say?

Shaw and Partners' senior investment advisor Jed Richards has slapped AMP with a sell rating.

Richards is pessimistic about the company's long-term growth prospects, saying:

The company has been a poor performer for many years. In our view, its first-half 2022 results showed weak earnings growth in its bank and wealth divisions. While recent asset sales may provide a payout boost to shareholders in the short term, they remove a key growth component from the company's business strategy. We believe AMP will require significant re-investment to regain lost scale.

In AMP's most recent half-year results, group profits dived to $117 million, down 24.5% from the prior corresponding period.

Let's check what else has been impacting the company recently.

What else happened?

At the beginning of September, AMP announced it would buy back 32 million of its own shares for a total value of $350 million. This is part of a planned $1.1 billion capital redistribution to shareholders, announced to the market in August.

Also this month, AMP missed out on a huge payday from losing control of its AMP Capital Retail Trust (ACRT).

The fund manages $2.7 billion of assets. It means the total potential earn-out from the sale of Collimate Capital's real estate and infrastructure business has fallen to just $20 million.

The sale originally came with an earn-out potential of $300 million but that dropped to $75 million when AMP previously lost control of its $7.7 billion AMP Capital Wholesale Office Fund (AWOF) in July.

Meantime in August, the company enjoyed a rally in its share price amid rumours AMP proposed a final offer to buy the Westpac Banking Corp (ASX: WBC) wealth management business.

AMP share price snapshot

The AMP share price is currently $1.17, down 2.09% so far today, while the S&P/ASX 200 Financials Index (ASX: XFJ) is 2.81% lower in early afternoon trade.

Despite the gloom surrounding the company today, AMP shares are up 17% year to date while the S&P/ASX 200 Index (ASX: XJO) has lost almost 10% over the same period.

AMP's current market capitalisation is around $3.8 billion.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

Person pointing finger on on an increasing graph which represents a rising share price.
Financial Shares

A leading investor just bought these ASX 200 shares for income and growth

These businesses have been chosen as top buys right now.

Read more »

A woman in a red dress holding up a red graph.
Financial Shares

Macquarie says this major fintech stock can rocket almost 100%

The signs are looking good for future growth.

Read more »

A man sits wide-eyed at a desk with a laptop open and holds one hand to his forehead with an extremely worried look on his face as he reads news of the Bitcoin price falling today on his mobile phone
Financial Shares

Why this ASX 200 financials stock is crashing 7.6% today

The shares are now 16.35% below the trading level this time last year.

Read more »

A group of people gather around a computer screen in rapt attention, one man holds his hands to cover his mouth as if in nervous anticipation of what news may come.
Financial Shares

AMP share price crashes 35% in 2026. What's next?

Here's what to expect over the next 12 months.

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Financial Shares

Up more than 80% in 12 months, there's still upside for this ASX finance company: broker

Two profit upgrades in under a month is good news in anyone's book.

Read more »

A close-up of a handshake depicting a business deal with one of the people in the background of the shot alongside a colleague looking pleased at the deal.
Financial Shares

Lowy family buys into Magellan after merger news pushes share price 25% higher

Steven Lowy said the merger with Barrenjoey would create 'a sound long-term investment' for the family.

Read more »

A young man wearing a bright yellow jumper and glasses purses his lips together and moves them to the side of his face as he wonders about something.
Financial Shares

2 ASX 200 financial shares to sell: Experts

Do you have these two ASX 200 stocks in your portfolio?

Read more »

Flying Australian dollars, symbolising dividends.
Financial Shares

Why investors are piling into this ASX stock today

FleetPartners shares jump after announcing a new $20 million on market share buyback.

Read more »