Noah Holdings stock rating stays Neutral as JPMorgan adjusts forecasts after 2Q results

On Tuesday, JPMorgan reiterated its Neutral rating on Noah Holdings Ltd . (NYSE: NYSE:NOAH), with a steady price target of $9.00. The firm adjusted its model to include the actual results from the second quarter of 2024, leading to revised assumptions in wealth management product (WMP) transaction volumes and revenue forecasts.

The adjustments reflect a decrease in WMP transaction volumes by 7%, 9%, and 11% for the years 2024, 2025, and 2026, respectively, due to difficult operating conditions and a transition in the domestic business service model.

Consequently, revenue forecasts for Noah Holdings were lowered by 6%, 7%, and 8% for the same years. In response to these challenges, the company has taken measures to improve its operating leverage, including closing offices in lower-tier cities. These changes have resulted in a reduction of operating expense forecasts by 7% across the board for 2024, 2025, and 2026.

These cost-saving measures, however, have not entirely offset the lowered revenue projections, leading to a decrease in non-GAAP net income estimates by 8%, 6%, and 7% for the three years. Despite the downward revisions, Noah Holdings has announced a share repurchase program, committing to buy back up to $50 million of its shares over the next two years. This buyback plan is significant, representing approximately 9% of the company's current market capitalization.

The analyst has incorporated the expected reduction in share count due to the potential share buybacks into the forecast periods. Additionally, the price target (PT) valuation date has been extended to December 2025, but the price target itself remains unchanged at $9.00. JPMorgan's stance on Noah Holdings continues to be Neutral, indicating a cautious outlook on the stock's performance.

In other recent news, Noah Holdings Ltd, a prominent wealth and asset management service provider, has reported its financial results for the second quarter and first half of 2024. Despite a year-over-year decrease in total revenues by 34.3% to RMB 621 million for the quarter, the company saw growth in its overseas client base and assets under management (AUM) and assets under advisement (AUA). This growth was accompanied by a 23% increase in overseas registered clients and a revenue jump of 221.9% for its online international wealth management business.

In addition to these developments, Noah Holdings' US dollar AUM and AUA witnessed a rise by 14% and 7.4% respectively. The company also authorized a US$50 million share repurchase program and reported a sequential increase in operating profit for the quarter by 10.3% to RMB 134 million. Amidst these financial developments, the firm is undergoing significant restructuring, separating its domestic and international businesses, and launching new international brands.

Analysts note that while the company anticipates a slowdown in business performance due to external challenges and internal restructuring, it is focusing on healthcare and retirement wellness products domestically and aims to serve Mandarin-speaking high-net-worth clients overseas.

InvestingPro Insights

Recent data from InvestingPro provides additional context to JPMorgan's neutral stance on Noah Holdings Ltd. (NYSE: NOAH). Notably, the company is trading at a low Price/Book multiple of 0.4, indicating potential undervaluation relative to its book value. Despite the challenging conditions highlighted, Noah Holdings has experienced a significant return over the last week, with a 7.53% price total return, which may interest short-term investors. Additionally, the firm is paying a significant dividend to shareholders, boasting a high dividend yield of 12.52%, which could attract income-focused investors.

While analysts anticipate a sales decline in the current year, with a revenue growth rate of -15.0%, the company's net income is expected to drop this year, reflecting the tough operating environment. However, with a P/E ratio (adjusted) of 5.42, the stock may appeal to value investors looking for low earnings multiples. For those considering a deeper dive into the company's financial health, InvestingPro offers a range of metrics and analysis, including more InvestingPro Tips for Noah Holdings at https://www.investing.com/pro/NOAH, with a total of 10 additional tips available to subscribers.

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