On Tuesday, Polar Capital Holdings (POLR:LN) experienced a change in its stock rating as Deutsche Bank adjusted its stance from "Buy" to "Hold." Accompanying this downgrade was a revision of the firm's price target to £5.10, a decrease from the previous £6.35. The modification by Deutsche Bank comes in response to a noticeable decline in Polar Capital's Assets under Management (AuM) and a shift in market conditions.
The investment bank's analysis suggests that Polar Capital has managed to achieve modest net inflows of around £0.1 billion in July and has continued to see small net inflows at the start of August. Nonetheless, the firm's current AuM is estimated to have fallen by roughly 9% from the figure reported on June 24. This decline is attributed mainly to the company's significant exposure to technology assets, which have been hit by a broader sell-off, as well as generally negative movements in the market.
Deutsche Bank's revised forecasts take into account the marked decrease in AuM, which due to the operational gearing within Polar Capital's business model, is expected to have a considerable effect on future earnings. The bank anticipates a downward adjustment of approximately 19% in earnings estimates for the outer years. This recalibration has similarly impacted the firm's valuation.
The rationale behind the downgrade was further clarified by the bank's statement, which highlighted the proximity of the new target price to Polar Capital's current share price. As a result, the recommendation was shifted to "Hold," reflecting a more conservative outlook on the stock's potential for growth in the near term.
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