AMP Ltd (ASX: AMP) shares have pushed higher so far in 2024 and are up more than 66% this year to date.
While the stock has caught the attention of ASX investors, speculation about its future is front and centre. AMP shareholders had endured years of pain before 2024, as seen in the chart below.
But the insurance and funds management giant has plenty up its sleeve, including potential mergers and acquisitions (M&A) of complementary businesses.
Could AMP shares offer more upside, or is caution warranted? Let's see what the experts say.
AMP shares on topic amid M&A focus
AMP shares have rallied this year as the company comes back in favour among Aussie investors. Now, market whispers suggest AMP might consider a merger with rival wealth manager Insignia Financial (ASX: IFL).
Insiders indicate this move would only be on the cards once Insignia has resolved its current operational challenges, according to The Australian.
Which is interesting because AMP has only recently emerged from a period of turbulence that saw its leadership overhaul and the divestment of AMP Capital.
For now, AMP is holding on to its New Zealand wealth management arm, which continues to perform to expectations and contribute to the group's overall profitability. This is despite the segment being considered a non-core asset, which could impact AMP shares.
Considering M&A activity is expected to increase this year, it wouldn't be a surprise if AMP were to swoop in and buy Insignia.
According to Corrs Chambers Westgrath, acquisition activity "experienced a resurgence" this year and is expected to increase further.
In the Australian public M&A market, we saw available capital, an appetite for strategic growth in sectors like technology, healthcare, and renewable energy and the need to secure a competitive advantage driving increased activity and a generally optimistic sentiment.
As domestic and international players re-engage in the market and vendors embark on long-awaited sales processes, we anticipate that M&A in 2025 will see us well on the road to recovery.
Whilst there's no saying on a purchase price or valuation, AMP will need to put its balance sheet to work if it does intend to buy Insignia.
A quick check of its latest quarter numbers shows it is in reasonable shape.
The update showcased steady growth across its platforms and superannuation businesses.
Assets under management (AUM) on its platforms rose to $78 billion in Q3 FY24, up from $74 billion in the previous quarter.
AMP Bank showed modest growth, with its total loan book climbing to $23 billion and total deposits increasing to $21 billion.
What do brokers say?
The jury is still out on whether AMP shares offer further upside. Analysts at Ord Minnett recently described AMP's quarterly results as "positive," highlighting stabilisation across its core businesses.
However, the broker rated the stock a hold, citing potential exposure to market volatility and nominal asset movements.
The firm said AMP's earnings growth would likely match what the market does in terms of fluctuations. This is opposed to a unique driver from the business.
Meanwhile, consensus rates AMP shares a hold, according to Commsec.
Foolish takeout
While AMP shares have rallied significantly this year, there's plenty to think about. The firm's near-term may hinge on the potential for M&A activity, but time will tell.
Investors have bid up ASX financial stocks like AMP this year to new highs. Many have outpaced the broad market.
In the last 12 months, AMP shares are up 80%.
