Monday (NASDAQ:MNDY), BMO Capital Markets updated its outlook on shares of Victory Capital Holdings, Inc. (NASDAQ:VCTR), raising the price target to $71 from $69, while maintaining an Outperform rating. The firm believes that the company's 2025 outlook is promising, citing several potential growth drivers.
Victory Capital's outlook through 2025 is seen as particularly strong due to anticipated improvements in net flows and revenue synergies from its partnership with Amundi. Moreover, the current mergers and acquisitions (M&A) climate is viewed as "extremely constructive," which could benefit the company.
The firm also pointed out the possibility that Victory Capital may resume stock buybacks and highlighted the expected reduction in private equity ownership overhang as a positive development. These factors contribute to the financial institution's optimistic view of Victory Capital's future performance.
BMO Capital Markets underscored Victory Capital's history of consistent management execution as a key reason for the positive rating. Coupled with what is considered an undemanding valuation, trading at 11 times adjusted earnings, Victory Capital is positioned as the firm's top stock selection within its coverage.
The adjusted price target reflects BMO Capital Markets' confidence in Victory Capital's strategic initiatives and potential for shareholder value creation over the next few years. Victory Capital's stock outlook is bolstered by the combination of operational strengths and favorable market conditions.
In other recent news, Victory Capital Holdings, Inc. reported a robust third-quarter performance, with total client assets reaching over $181 billion, marking the company's second-highest quarter-end total.
The company's strategic transaction with Amundi is anticipated to close in the first quarter of 2025, a move expected to significantly enhance Victory Capital's value. This projection is supported by the Amundi US Business's positive net long-term flows of approximately $2 billion in 2024.
Victory Capital also revealed a 7% dividend increase to $0.44 per share and expects to realize $100 million in expense synergies from the Amundi transaction within two years. The company's average assets under management increased to $172 billion, yielding a corresponding revenue rise to $225.6 million.
These developments follow a strong investment performance, with 67% of assets under management rated 4 or 5 stars by independent rating agencies. Management remains cautiously optimistic about future performance, particularly in fixed income, and is prepared for further acquisitions, especially after the Amundi acquisition. These recent updates underscore Victory Capital's ongoing growth and strategic positioning.
InvestingPro Insights
Recent data from InvestingPro reinforces BMO Capital Markets' optimistic outlook on Victory Capital Holdings, Inc. (NASDAQ:VCTR). The company's financial metrics and market performance align well with the positive sentiment expressed in the article.
Victory Capital's P/E ratio of 16.41 and PEG ratio of 0.49 for the last twelve months as of Q3 2024 suggest that the stock may be undervalued relative to its earnings growth potential, supporting BMO's view of an "undemanding valuation." This is further emphasized by an InvestingPro Tip indicating that VCTR is trading at a low P/E ratio relative to near-term earnings growth.
The company's strong financial health is evident from its revenue growth of 6.14% and EBITDA growth of 10.76% over the last twelve months. Additionally, Victory Capital boasts an impressive operating income margin of 48.95%, demonstrating efficient management and robust profitability.
InvestingPro Tips highlight that Victory Capital has raised its dividend for 6 consecutive years and currently offers a dividend yield of 2.66%. This consistent dividend growth, coupled with a significant return of 121.74% over the past year, aligns with BMO's positive outlook on the stock's performance.
For investors seeking more comprehensive analysis, InvestingPro offers 15 additional tips for Victory Capital, providing deeper insights into the company's financial position and market potential.
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