Will it pay to be bullish on the Abrdn share price?

Although Abrdn’s [ABDN.L] share price hasn’t fallen back to its early March lows, April hasn't exactly been a banner month for the stock. Over the past month, Abrdn’s stock has fallen 5.2% (as of Friday 22 April), and off the pace of the FTSE 100’s 2.2% gain.

As one of the UK’s biggest asset managers, Abrdn’s share price and business performance is always going to be affected by what’s happening in the markets. With pessimism surrounding the UK economy and war in Ukraine, the outlook at the moment is decidedly uncertain.

Still, Abrdn’s stock has some things going for it. Shares of Abrdn are arguably trading at a discount and there's a decent dividend for income seekers. Yet the big question remains as to whether the company can convince its clients to keep their cash invested and stop the continued outflow of money.

What’s happening with Abrdn’s share price?

April’s poor performance aside, Abrdn’s share price has been hammered this year. Shares in the investment specialist have fallen 19.76% so far this year, well below the FTSE 100’s 1.86% gain over the same period. Yet, Abrdn isn’t the only asset manager to have a rough time of it with Legal and General down 10.86% this year.

Why should investors care about Abrdn’s share price?

As a recent Investors Chronicle article points out, Abrdn’s shares are now trading at a considerable discount to net asset value. According to Abrdn’s full year 2021 report, the firm manages £542bn in assets, however the company has a market cap of £4.31bn. Moving into a period of market uncertainty, Abrdn could be considered a value stock that pays a reasonable dividend making it an attractive near to medium-term play.

Abrdn has also stumped up £1.49bn to acquire Interactive Investor — one of the biggest investment platforms in the UK. According to Abrdn, the acquisition will diversify revenues, ‘significantly’ expand client reach and eventually lead to double-digit earnings growth.

Full year 2021 results gave shareholders something to cheer about in March. Adjusted operating profit came in at £323m, up 47% year-on-year. Fee based revenue was £1.5bn, up 6% year-over-year, while the cost/income ratio improved to 79% compared 85%.  Outflows of £3.2bn were a marked improvement on the previous year’s £12.3bn.

What does the dividend look like?

Abrdn rewarded shareholders with a14.6p full year dividend per share for 2021. In its full year results, Abrdn said that the intention was to grow the dividend in line with its assessment of growth in the medium term. Promising stuff if Abrdn does manage to grow its business. In comparison, Legal and General had a 18.45p total dividend for 2021.

Should investors be bullish on Abrdn’s stock?

To really turn things around Abrdn has to stop the continued outflow of assets and convince clients to keep their money invested. To its credit the asset manager has managed to beat benchmark performance in most of its funds, but lags competitors in terms of ESG credentials. Should inflows increase, operating costs fall further and the Interactive Investor acquisition pay off, then Abrdn could make a compelling investment case.  

As it stands, analysts seem unconvinced. In April, RBC Capital Markets reiterated its ‘underperform’ rating on the stock in April while chopping its price target to 185p from 225p. At the end of March, Morgan Stanley reiterated its ‘underperform’ rating on Abrdn while slashing its price target to 225p from 271p. Going the other way was Deutsche Bank, which upped its price target price to 235p from 230p in March.

The 14 analysts offering 12-month price for Abrdn have a median price target of 232.5p, suggesting a 20.3% upside on Friday’s close. The overall consensus recommendation is muted, with two ‘buy’, three ‘outperform’, six ‘hold’, four ‘underperform’ and one ‘sell’ rating.