On Monday, UBS raised the price target for Victory Capital Holdings, Inc. (NASDAQ:VCTR) to $48 from the previous $37, while keeping a Neutral rating on the stock. The adjustment follows an increased 2025 earnings per share (EPS) estimate by 13%, based on expected additional assets under management (AUM) of $104 billion. The forecast assumes these assets will come with a slightly lower fee rate, about 1-2 basis points below the current average for Victory Capital.
The analyst also anticipates expense synergies ranging between $65 million and $75 million next year. These synergies are expected to contribute to a projected operating margin of around 46% for the full year of 2025. The firm's outlook includes the issuance of approximately 15 million new shares, which would dilute existing shareholders' equity by 26.1%.
The report suggests that the all-stock transaction associated with the AUM increase will decrease Victory Capital's leverage to a range of 1.0 to 1.5 times earnings before interest, taxes, depreciation, and amortization (EBITDA). This reduced leverage is seen as a positive move for the company's financial health.
However, the analyst notes a potential downside regarding Victory Capital's tax benefits. The absence of a step-up in tax basis is expected to lower the company's cash tax benefit from the current 11% to an estimated 7%. This reduction in tax advantage could affect the company's net income, despite the overall positive outlook presented by the increased AUM and expense synergies.
InvestingPro Insights
UBS's recent price target increase for Victory Capital Holdings (NASDAQ:VCTR) aligns with several positive indicators observed in the company's performance metrics. Victory Capital's commitment to rewarding shareholders is reflected in their consistent dividend growth, having raised its dividend for five consecutive years. This dedication to shareholder value is noteworthy, especially considering the dividend yield stood at 2.82% as of the last recorded date.
Analyzing the company's stock performance reveals an impressive trajectory. Victory Capital has experienced a significant return over the past week, with a 11.48% price total return, and the momentum extends over the past month, three months, and six months, with returns of 14.33%, 36.01%, and 65.62% respectively. These figures underscore the company's strong performance in the short term and indicate investor confidence.
Victory Capital's financial health is further supported by its liquid assets, which exceed short-term obligations, ensuring the company can meet its immediate financial liabilities. With a P/E ratio of 14.66 and an adjusted P/E ratio for the last twelve months of 12.94, the company's valuation metrics suggest a potentially attractive investment relative to earnings. The company's operating income margin of 43.61% for the last twelve months also highlights efficient management and profitability.
For investors seeking a deeper analysis and additional insights, there are more InvestingPro Tips available. These tips can provide further guidance on whether Victory Capital's current market performance and future outlook align with your investment strategy. To enrich your investment decision-making, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and unlock the full range of insights on Victory Capital at https://www.investing.com/pro/VCTR.
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