Franklin Resources stock target raised to $20 at TD Cowen

On Monday, TD Cowen maintained a Hold rating on Franklin Resources (NYSE:BEN), a $10.9 billion asset management firm, while raising the price target to $20 from the previous $19. The adjustment comes in the wake of the company’s first fiscal quarter of 2025 earnings report, which was followed by a significant stock price increase of over 10%. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with additional upside potential despite the recent rally.

The earnings report, released on January 31, 2025, presented a mixed picture, yet the market responded positively to Franklin Resources’ announcement of an additional $200-250 million in cost savings. These savings are expected to be fully realized by the beginning of fiscal year 2027, which starts in October 2026. The company, which boasts a remarkable 44-year track record of consistent dividend payments and currently offers a 5.76% dividend yield, has maintained investor interest despite challenges. TD Cowen suggests caution, pointing out that the net impact on the bottom line might not be as significant as investors anticipate, especially when considering the potential absence of salvage value from WAMCO.

The revised price target of $20 reflects the newly announced cost savings and updated flow trends. TD Cowen’s valuation of Franklin Resources is now based on the annualized fourth fiscal quarter of 2026, estimating earnings at $2.48 per share. The firm applies a 9x earnings multiple and discounts it by approximately six months at a 12% cost of capital to account for the heightened franchise risk.

TD Cowen’s analysis acknowledges that while the fundamentals of Franklin Resources, excluding WAMCO, are stable to improving, the firm recommends investors should be cautious about the recent surge in stock price following the January 31 announcement. The limited outlook for earnings per share growth underpins their position to maintain a Hold rating despite the increased price target.

In other recent news, Franklin Resources has seen significant activity in its financial performance and strategic outlook. The company reported a robust first quarter, with earnings per share of $0.59 and revenues of $2.25 billion, exceeding analyst expectations. Goldman Sachs analyst Alexander Blostein upgraded Franklin Resources from Sell to Neutral, reflecting an improved outlook for the company’s financial future.

In a strategic shift, Franklin Resources declared its intention to raise $100 billion in private markets over the next five years and significantly expand its ETF and Canvas AUM. Despite these positive developments, the company also faced challenges, including a decrease in assets under management to $1.63 trillion due to negative market conditions and substantial long-term net outflows.

BofA Securities adjusted its outlook on Franklin Resources, raising the price target to $20.00 while maintaining an Underperform rating. This adjustment was based on revised earnings per share estimates for the coming years and the company’s new expense guidance. Lastly, TD Cowen adjusted Franklin Resources’ outlook due to concerns about its Western Asset Management Company division and leverage issues, reducing the price target from $20.00 to $18.50.

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