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On Thursday, BofA Securities adjusted its stance on AllianceBernstein (NYSE:AB), downgrading the asset management firm’s stock rating from Buy to Neutral and reducing the price target to $38.00 from the previous $42.00. The revision reflects concerns over challenging market conditions and a deceleration in organic growth. Currently trading at $39.01, the stock has shown resilience with a 23.27% return over the past year, despite InvestingPro data showing three analysts recently revising their earnings estimates downward. BofA Securities cited several recent developments that could potentially impact investor sentiment, including the lack of a corporate structure change, the outcome of an AXA Equitable Holdings (NYSE:EQH) Dutch auction, and the resignation of AllianceBernstein’s CFO.
The firm’s analysis pointed to a recalibration of their 2027 earnings estimates, which were trimmed by 9% in light of the less favorable market environment and subdued growth prospects. Despite these challenges, InvestingPro analysis indicates the stock is currently undervalued, trading at an attractive P/E ratio of 10.19 while maintaining a remarkable 38-year streak of consistent dividend payments with a substantial 10.77% yield. The lowered price objective from BofA Securities comes as a response to these adjustments and the completion of significant operational leverage opportunities at AllianceBernstein, such as the expiration of their New York City headquarters lease and the sale of their Research division.
BofA Securities expressed a more cautious outlook for AllianceBernstein, noting that the recent events, including the decision against converting to a C-corporation and the CFO’s departure, might complicate the stock’s appeal to investors. These factors are seen as potential hurdles in maintaining the previous Buy rating.
The downgrade and new price target are set against the backdrop of AllianceBernstein’s strategic moves and market performance. While the company has made efforts to optimize its operations, the current market dynamics and internal changes appear to have weighed on BofA Securities’ assessment of the stock’s potential.
Investors and market watchers will likely monitor AllianceBernstein’s response to these challenges and the impact of BofA Securities’ revised outlook on the company’s stock performance in the near term. With an "GREAT" overall financial health score from InvestingPro, which offers comprehensive analysis and additional insights through its Pro Research Report covering over 1,400 US stocks, investors can access deeper analysis to make more informed decisions about AB’s investment potential.
In other recent news, AllianceBernstein Holding L.P. reported impressive fourth-quarter earnings, surpassing analyst expectations. The company posted an adjusted diluted net income of $1.05 per unit, exceeding the consensus estimate of $0.87. Revenue for the quarter reached $1.26 billion, significantly higher than the projected $901.07 million. Despite these strong financial results, AllianceBernstein experienced net outflows of $4.8 billion in the fourth quarter, although the full year 2024 saw a reduction in total net outflows to $2.2 billion, compared to $7.0 billion in 2023.
In a related development, Equitable Holdings, Inc. announced the preliminary results of its cash tender offer for AllianceBernstein units, acquiring approximately $761 million worth of units. This acquisition will increase Equitable’s economic interest in AllianceBernstein L.P. to about 68.6%. The tendered units represent 17.9% of the outstanding units as of December 31, 2024. Equitable Holdings plans to finalize the number of units purchased following the guaranteed delivery period and verification process. These developments highlight significant financial activities and strategic moves involving both companies.
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