The Macquarie Group Ltd (ASX: MQG) share price has had a solid year so far.
Since the start of 2023, the investment bank's shares have risen 7% to $178.92.
This is more than double the return of the S&P/ASX 200 Index (ASX: XJO) over the same period.
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Can the Macquarie share price keep rising?
According to a note out of Citi, its analysts believe the Macquarie share price is fully valued now.
As a result, the broker has reiterated its neutral rating and $175.00 price target on the bank's shares.
This is broadly in line with where its shares are trading today.
What did the broker say?
Citi was pleased with Macquarie's FY 2023 profits and highlights that a very strong performance from the Commodities and Global Markets (CGM) segment drove the record result. It said:
MQG printed cash earnings for FY23 of $5,182m, +10% on the pcp and another record for the group. While the profit number is material, what is more extraordinary, in our view, is the narrowness of the earnings growth in recent periods. CGM net profit contribution rose 54% on the pcp, propelled by commodity revenues benefiting from event-driven volatility.
While the strength of the CGM business is great, Citi points out that its earnings visibility is low. That's not a great thing when it is becoming such a major part of the company's overall earnings. It concludes:
While the group result was largely in-line with expectations, the strength in CGM papered over slightly softer results in the other divisions, which all missed our expectations. Looking forward, we believe investors will ask whether the guidance provided on commodities revenues is too conservative, particularly given management's tendency to pitch low early in the year. However, the fact remains that CGM is becoming an increasingly dominant driver of the group where visibility is low.
In light of the above, the broker doesn't appear the risk/reward is compelling enough to buy shares now.
