The Magellan Financial Group Ltd (ASX: MFG) share price is 5.42% lower at the time of writing on Thursday morning, changing hands at $9.95 a piece.
Over the year, the share price is 5.51% higher.
But what can we expect from the stock next? And are the shares still a buy?
Here's what Macquarie Group Ltd (ASX: MQG) analysts think of Magellan Financial Group shares.
Macquarie updates its guidance
In a recent note to investors, the broker downgraded its rating on Magellan Financial Group to underperform. It also raised its 12-month target price to $8.65.
At the time of writing on Thursday morning, this represents a potential 13.1% downside for investors.
"While we downgrade EPS, we lift our TP from $8.37 (PE based) to $8.65 (avg of DCF, PE Rel & SOTP), with the PE lifting from 8.0x to 12.6x," Macquarie said in its note.
"Underperform: The current share price implies a ~14.4x 12-month forward PE multiple, with a number of key catalysts with downside risks."
Downside risks ahead for Magellan Financial Group
In its note, Macquarie explains that Magellan Financial Group shares face three downside risks.
Firstly, a downside risk to consensus associate profits due to elevated Vinva results. Magellan Financial Group reported an uplift in its share of associate profits to $31.1 million in FY25, up from $10.3 million in FY24. This was underpinned by an improvement in Barrenjoey profits, coupled with contribution from its new associate Vinva.
Magellan Financial Group's share of profit from Barrenjoey was $21.6 million in FY25, up from $12.6 million in FY24. Its share of profits from Vinva was $9.5 million.
"With our revised Associate profits conservatively assuming ~1bps of performance fee margin (vs ~2bps over FY22-24) and well below Cons estimates (FY26E $31.0m vs Cons $43.5m, and FY27E $41.3m vs Cons $49.1m), we see downside risks to FY26E+ earnings," Macquarie said.
Secondly, Macquarie says the company is subject to risk from consensus distribution income from seed assets. The group reported an elevated distribution income from seed assets of $42.2 million in FY25. This implied a yield of 10.1% on average seed assets – well ahead of the long-term average of 5.1%.
"Our analysis suggests the elevated distribution income was driven by both the Magellan Global Open Class and the Magellan Global Closed Class funds in both the 1H25 and FY25 result (principally due to strong capital gains). Assuming a more typical yield of ~5% on the seed book suggests more modest distribution income of ~$21m in FY26E – below Visible Alpha consensus estimates of ~$26m," the broker said.
Lastly, Magellan Financial Group faces risk to its infrastructure flows. Portfolio manager Gerard Stack announced his departure earlier this year, and impending infrastructure fund rating reviews.
"The Infrastructure strategy currently contributes $16.4bn to FUM as at Jun-25, or ~42% of total FUM. We see significant downside risk to total net flows in the near-term and assume $5.16bn of net outflows in FY26E (or 14.2% of FUM) below consensus at $4.61bn (or -11.6%), and $3.20bn in FY26E (or 9.2% of FUM) vs consensus at $2.14bn (or 5.7% of FUM)."
