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On Monday, Goldman Sachs analyst Alexander Blostein adjusted the firm's stance on Affiliated Managers Group (NYSE:AMG), downgrading the stock from Buy to Neutral and setting a price target of $191.00. The downgrade reflects concerns about the company's organic EBITDA growth, which is anticipated to decline to -3% in 2025.
This negative outlook is attributed to the underperformance of AMG's Active Equity affiliates, which contribute 45% of EBITDA, potentially increasing flow risks and diminishing the positive effects from the firm's Alternatives (Alts) business segment.
Blostein notes that despite AMG's capital flexibility, recent high acquisition multiples in the Alternatives space might constrain the company's opportunities. The analyst's estimates for AMG's earnings per share (EPS) and EBITDA from 2025 to 2027 are slightly below the consensus, suggesting there might be a downside to AMG's stock multiple if organic growth continues to decline.
The new price target of $191.00 is based on a 7.4X forward price-to-earnings (P/E) multiple, calculated using projected earnings from the fifth to the eighth quarter ahead. This valuation reflects a more cautious view of AMG's future financial performance, particularly in the context of the firm's Active Equity segment's challenges.
Blostein's commentary emphasizes the risks to AMG's growth trajectory, specifically pointing to the potential deterioration of the company's organic EBITDA and the high costs of acquisitions in the Alternatives market. The revised price target and stock rating suggest a reevaluation of AMG's prospects in the face of these headwinds.
Investors and market watchers will likely monitor AMG's performance closely, especially with regard to its Active Equity affiliates and the Alts business, to see if the company can navigate the challenges outlined by Goldman Sachs and achieve its financial targets despite the predicted downturn in organic EBITDA growth.
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