Why the Magellan Financial (ASX:MFG) share price is down 21% in a month

Magellan shares have slipped into the red from the opening of trade on Monday.
The post Why the Magellan Financial (ASX:MFG) share price is down 21% in a month appeared first on The Motley Fool Australia. –

The Magellan Financial Group Ltd (ASX: MFG) share price has slipped into the red from the opening of trade on Monday.

It adds to Magellan shares’ struggles over the last few weeks.

Whereas the S&P/ASX 200 Index (ASX: XJO) has slipped around 2% in the red, Magellan shares are down 21% over this time.

Let’s investigate a little further to find out why.

What headwinds have been in front of the Magellan share price?

The Magellan share price has faced several headwinds over the last month that are worth noting.

Magellan shares have been on the move since the company reported its FY21 earnings back in August.

In its report, the company recognised a 33% net profit after tax (NPAT) to $265 million and an adjusted net profit after tax of $412 million, down 6% year on year.

As a result, the company rewarded shareholders with a $2.11 per share dividend, down 2% year on year.

Investors weren’t pleased with the company’s results at all. As such, the Magellan share price took a 10% nosedive in the short time following its FY21 earnings release.

News that a major competitor may be listing on the ASX hasn’t helped Magellan’s share price woes either.

Active investment management outfit GQG Partners purportedly intends to list on the ASX, with a planned initial public offering (IPO) valued north of $5 billion.

The firm has over $83 billion in assets under management (AUM) and is reportedly seeking to list in order to increase exposure and boost its brand recognition.

For comparison, Magellan recently advised its total funds under management (FUM) stood at $117.95 billion which is a paltry 0.8% year on year increase from FY20.

It appears that investors were banking on Magellan delivering more in its FUM update and have sold on the news. The Magellan share price has slipped around 9% since releasing this news.

Adding salt to the wounds is that investment bank UBS recently cut its price target to $35 on Magellan shares and downgraded its recommendation from neutral to sell. That price target implies an 11.6% downside potential from Magellan’s current share price.

Magellan share price snapshot

The Magellan share price has been a major underperformer on the Australian indices this year, having posted a loss of 26% since January 1.

This extends the loss over the last 12 months to 30%. In the past month alone, Magellan shares have slipped a further 21% into the red.

These results have lagged the broad index’s return of around 25% over the past year.

The post Why the Magellan Financial (ASX:MFG) share price is down 21% in a month appeared first on The Motley Fool Australia.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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