Macquarie Group Ltd (ASX: MQG) shares fell again on Monday.
The investment bank's shares dropped over 2% to close the day at $173.50.
Investors have been selling Macquarie shares since the release of its full-year results last week.
Are Macquarie shares attractively priced now?
Morgans is likely to see the recent weakness in its share price as a buying opportunity for investors.
On Monday, the broker responded to Macquarie's results by reaffirming its equivalent of a buy rating on the bank's shares.
According to the note, Morgans has retained its add rating with a trimmed price target of $202. Based on where Macquarie shares currently trade, this implies potential upside of just over 16% for investors over the next 12 months. It is also forecasting a 3.6% dividend yield in FY 2024, sweetening the deal further.
While the broker acknowledges that the quality of the result was lower than hoped, it was still ahead of expectations. It said:
MQG's FY23 NPAT (A$5.18bn) was +10% on the pcp and 2% above company compiled consensus (A$5.08bn). The 2H23 dividend (A$4.50ps, 40% franked) was 18% above consensus (A$3.82ps). In our view, it could be argued this was a lower quality beat by MQG, but there is no doubt the diversity of its franchise seems to help MQG generally find a way to outperform.
Looking ahead, the broker also acknowledges that there are risks to its earnings in FY 2024 that could mean it falls short of expectations. However, it concedes that this has been the case many times in the past and the company still finds a way to deliver. It explains:
On FY24 guidance, similar to recent years, MQG has given no specific NPAT guidance figure. Broadly MQG's divisional commentary points to expected improved results in BFS (strong volume growth) and Macquarie Capital (better deal activity) than in FY23, but weaker results in MAM (lower investment related income) and CGM (more subdued commodities trading conditions). Clearly CGM particularly, shapes as a large earnings swing factor in FY24, noting Commodities income guidance is very wide, e.g. expected to be down on the FY23 performance (A$6bn), but up on the FY22 result (A$3.3bn). Given MQG has already said volatility in some of its CGM operations started to subside in 4Q23, we see FY24 earnings risks as likely weighted to the downside, although noting similar risks in prior years did not eventuate.
Despite the above, the broker sees plenty of value in Macquarie shares and continues to recommend them as a buy. It concludes:
MQG is a quality franchise, exposed to structural growth areas, and the company performed exceptionally well in a more difficult FY23 environment. With >10% share price upside to our price target, we continue to maintain our ADD recommendation.
