The Magellan Financial Group Ltd (ASX: MFG) share price has seen significant volatility in 2025 to date, as the chart shows below. The broker UBS is quite bullish on the potential for the business to deliver strong returns.
UBS describes Magellan as a fund manager of institutional, wholesale and retail funds in global shares and listed infrastructure shares. Plus, it has an Australian shares strategy segment. It also has investments in investment bank Barrenjoey, financial technology business Finclear, and the fund manager Vinva Investment Management.
The broker currently rates Magellan shares as a buy and increased its price target on the business after seeing Magellan's April 2025 funds under management (FUM) update. Let's have a look at why UBS is excited about the business.
The broker noted the first signs of fund outflows in the April 2025 update after the announced departure of Magellan's head of investments, Gerald Stack.
Magellan experienced $1 billion of net outflows in April, including $0.1 billion of retail outflows and represented a slowdown from the recent history $0.2 billion per month. Institutional outflows came to $0.9 billion, which appeared to the broker to be largely within the infrastructure strategy, but this was within UBS' "allowance" after Gerald Stack's exit.
Overall, the broker viewed the monthly update as a positive result given the slowdown in higher margin retail outflows and that the infrastructure outflows were largely priced into UBS' forecasts.
The broker noted that (when the Magellan share price was $7.93), around 70% of Magellan's market capitalisation was underpinned by cash and investments, with the funds management business trading at around 4.5x earnings, with an ongoing share buyback boosting earnings per share (EPS).
UBS also pointed out that the addition of the $1.4 billion Vinva Global Alpha Extension Fund is a boost for Magellan's FUM figure – Magellan Asset Management is now the responsible entity. UBS has 'allowed' nil revenue impact from this, assuming Magellan is only entitled to fees on new flows not this product from now on.
The broker's forecasts allow for a further $2.3 billion of net outflows from infrastructure strategies through to June 2025.
After seeing that update, UBS increased its Magellan EPS forecast by 1% for FY25 and 8% for FY26, as well as higher FUM, due to stronger share markets in April.
A price target is where an analyst thinks the share price will be in 12 months from the time of the investment call. UBS has a price target of $9.20 on Magellan shares, implying a potential rise of 10%. The broker is also predicting a dividend per share of 5.6% in FY26 (excluding any franking credits). So, overall, the total return for Magellan shares could be more than 15% in the next year, if UBS Is right.
However, while the picture has improved, it should be noted that UBS is still predicting EPS to decline each year between FY25 to FY29, though the speed of the decline may almost have stopped by FY29.
At the current Magellan share price, it's valued at 12.5x FY26's estimated earnings.
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