On Monday, UBS has downgraded AXA Equitable Holdings Inc (NYSE:EQH) to a Neutral rating from its previous Buy status, while simultaneously raising the price target to $43.00 from $40.00. The shift in rating comes amid expectations that further price-to-earnings (P/E) multiple expansion and upward earnings revisions for the company are less likely going forward.
The UBS analyst has modestly increased the 2025 estimated earnings per share (EPS) to $7.30, up from the previous estimate of $7.19, citing a slightly higher investment yield. However, the analyst anticipates that the upside to net investment income (NII), excluding variable interest income (VII), has likely reached its peak. Additionally, there's a projection that sales momentum for annuity products may decelerate as long-term interest rates are expected to trend lower.
The report further notes that rising crediting rates may exert pressure on the core return on assets (ROA) of AXA Equitable Holdings. The company's stock is currently trading at 6.1 times the next twelve months (NTM) consensus EPS estimates, which is near its three-year historical high and 21% above its three-year historical average. This suggests that the favorable macroeconomic environment, along with sales growth and net flows, might already be reflected in the current stock price.
Despite the downgrade, the analyst acknowledges several positive aspects of AXA Equitable Holdings. Investment management flows remain favorable, and there is strong sales performance in Retirement Income and Legacy Annuity (RILA) products. Growth potential is seen from the company's partnerships with BlackRock (NYSE:BLK) and AllianceBernstein (NYSE:AB). Furthermore, the management of AXA Equitable Holdings has expressed confidence in maintaining a payout ratio between 60-70%.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.