AllianceBernstein (AB) stock climbed 3.1% in Tuesday morning trading after Bank of America Securities upgraded the asset manager to Buy from Neutral, now making it BofA’s top traditional asset manager pick.
The upgrade comes after AB stock performance lagged other asset management stocks, a correction that BofA analyst Craig Siegenthaler sees as largely unwarranted.
Meanwhile, cost savings through 2025 and expected reacceleration of net flows through large fixed income reallocations form the basis of his thesis.
“We expect investors to reallocate into fixed income in mass after the Fed ‘pause’ and believe AB is among the best positioned to capitalize,” the analyst wrote in a note to clients. He cites AllianceBernstein’s (AB) strong investment performance against such giants as BlackRock (BLK), Allianz’s (OTCPK:ALIZF) Pimco, and Western/Franklin Resources (BEN); its broad product/vehicle offering; and its wide distribution platform.
In addition, the company expects to save $75M from its headquarters move to Nashville as its NYC office lease expires in November 2024. It’s also deconsolidating its Equity Research business in H1 2024 to form a new joint venture with Societe Generale. AB conservatively targets a 350-500 basis point operating margin increase by 2027. “This should provide a huge EPS accelerator and drive upside to market EPS expectations for AB in 2025-26,” Siegenthaler said.