AMP Ltd (ASX: AMP) shares climbed to a fresh five-year high of $2.11 during Tuesday afternoon trade, extending one of the strongest rallies on the ASX this year.
The financial services company's shares have soared 18% over the past five trading days following last week's upbeat earnings update, taking their gain over the past 12 months to around 32%.
So, after a remarkable turnaround, should investors buy, hold, or sell?
Image source: Getty Images
A dramatic reversal
The latest rally marks a stunning recovery from mid-March, when AMP shares slumped to a one-year low of $1.14. Since then, the stock has surged roughly 80%.
It wasn't always smooth sailing. AMP shares plunged about 26% in February after the company delivered a disappointing FY25 result that fell well short of market expectations.
Broader concerns over geopolitical tensions and Australia's inflation outlook also weighed on financial stocks during the first half of the year.
Sentiment began to improve in April. AMP's first-quarter update revealed Platforms' net cash flows had surged 45%, while Superannuation & Investments delivered improved net cash outflows. Investors took the figures as a sign that the company's turnaround strategy was gaining traction.
That optimism accelerated last week. AMP told the market it expects first-half underlying net profit of between $170 million and $180 million, well above the $131 million reported a year earlier. The stronger earnings outlook reinforced confidence that operational improvements are translating into better financial performance.
AMP has also benefited from growing expectations that the Reserve Bank of Australia will continue lowering interest rates, a backdrop that generally supports sentiment towards financial companies.
What do the experts think?
Broker sentiment remains broadly positive, although much of the recent optimism now appears reflected in the share price.
According to TradingView data, six of the ten analysts covering AMP have either a buy or strong buy recommendation. Three rate the shares as a hold, while one recommends selling.
However, the average price target now sits at $2.02 per AMP share, implying the stock is trading slightly above consensus fair value after its recent rally.
The most optimistic analyst sees AMP reaching $2.19 over the next 12 months, suggesting a further gain of around 5%.
Foolish Takeaway
AMP's turnaround story has gathered considerable momentum over recent months.
Improving business flows, stronger profit expectations, and a more supportive interest rate outlook have all helped restore investor confidence after a difficult few years.
That said, after an 80% rally since March and fresh five-year highs, much of the good news may already be priced into AMP shares.
With broker price targets sitting close to current trading levels, existing shareholders may be inclined to hold, while prospective investors may want to wait for either another improvement in earnings or a more attractive entry point.
