Down 50% so far this year, have Magellan shares got further to fall?

The risk-adjusted returns for Magellan continue to shift lower.

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Key points

  • Magellan shares continued to drift lower this week and finished at 52-week lows 
  • Analysts are tipping further downside to come with a string of further downgrades to start Q2 
  • In the past 12 months, the Magellan share price is down 67% 

After a shocker year, shares of Magellan Financial Group Ltd (ASX: MFG) are on the precipice of falling even further.

The share finished the session on Friday at $10.67, bringing losses for the year to date to 50%, and 67% for the past year.

As such Magellan has failed to recover its pandemic losses and now trades at its lowest mark in almost 10 years, as seen below.

Also shown is Magellan's performance against the benchmark S&P/ASX 200 Index (ASX: XJO) over the same time period.

Note, in particular, the split in performance between Magellan and the benchmark from the onset of the pandemic in February 2020.

TradingView Chart

Is there more downside for Magellan?

Magellan shares were initially rocked by the shock double-departure of the company's CEO Brett Cairns, followed by co-founder and director Hamish Douglass.

After an internal crisis period, a new CEO and a fresh set of strategies emerged, including a strategic review, and a planned share buyback to prop up the share price.

Despite the efforts, monthly outflows from Magellan's various investment vehicles have remained high over the past year.

In its funds under management (FUM) update released yesterday, the group reported $3.2 billion in institutional outflows from 31 August–30 September 2022.

Notes show one client redeeming $1 billion of capital alone. This was coupled with a $1.8 billion outflow of retail investment funds as well.

In fact, Douglass had even sold more than 760,000 of his Magellan shares by July 2022, according to mandatory filings made with the Australian Securities and Investment Commission (ASIC).

Adding to that, the fund's performance has been lumpy, with the previously outperforming infrastructure fund falling behind its benchmark by 1.7% in September.

Those at investment bank UBS have been following the fund's numbers and reckon there's more downside to come.

UBS analysts, led by Shreyas Patel, trimmed the broker's price target by another 5% to $9.80, reiterating their sell rating on Magellan in the process.

According to Patel, Magellan's "core global equity business is at risk of rebasing [down] further", despite the firm's upcoming AGM in October.

UBS joins a number of other firms in its posture on Magellan, with 7 out of 10 brokers rating it a sell right now, with the remaining 3 saying to hold, per Refinitiv Eikon data.

The following table summarises the progression of analyst coverage and consensus price target over the past 3 months, with data provided by Refinitiv Eikon.

Recommendation 07-Jul-202207-Aug-202207-Sep-2022Current
Buy    
Hold2333
Sell7667
Price Target07-Jul-202207-Aug-202207-Sep-2022Current
Consensus$12.40$11.50$12.00$10.90
Change month to month-7.2%4.3%-9.1%

The current consensus price target from this list is $10.62, suggesting there's a little more downside expected for Magellan shares.

In the meantime, investors lay in wait patiently for the firm's AGM to be presented later this month. As to whether this will provide any form of retribution on the charts, we will have to wait and see.

Motley Fool contributor Zach Bristow 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 no position in any of the stocks mentioned. 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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