TD Securities Downgrades Manulife to “Buy” from Action List Buy”

TD Securities Downgrades Manulife to "Buy" from Action List Buy"

TD Securities Downgrades Manulife Stock: What Investors Need to Know

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TD Securities has made a significant move in the financial market, downgrading Manulife Financial Corporation’s (MFC) stock from an Action List Buy to Buy status. This decision comes with a revised 12-month target price of $37 per share. The downgrade reflects TD Securities’ assessment of relative performance and the diminished upside potential to their previous target price.

Since the announcement of the long-term care (LTC) reinsurance transaction in late December 2023 and the subsequent strong Q4/23 results, Manulife has shown significant outperformance compared to its closest life insurance competitors and Canadian banks. This outperformance, according to TD Securities analysts, may be partly attributed to market expectations of further reinsurance transactions by Manulife.

The LTC reinsurance transaction, which is expected to close in February, is freeing up capital for Manulife, with intentions to utilize it for stock buybacks. However, TD Securities believes that while further reinsurance transactions may be in the pipeline for Manulife, it is more likely that other U.S. insurers will engage in such deals before Manulife completes another transaction of a similar nature.

In response to Manulife’s strong Q4/23 results, TD Securities raised their earnings estimates by 9-10%. However, the recent introduction of a new global minimum tax has led to a downward adjustment of EPS estimates by 2-3%. The effective tax rate guidance for Manulife has also been revised to 17%-22%, up from 15%-20%, with the expectation that the increase will mainly impact low tax jurisdiction segments, particularly in Asia and Global Wealth and Asset Management (GWAM).

TD Securities’ decision to maintain a Buy rating on Manulife, albeit downgrading it from the Action List Buy, is underpinned by the company’s progress in freeing up capital from legacy businesses, which has been weighing on earnings stability and return on equity (ROE) compared to its peers. Additionally, the strong growth platforms in Asia and Global Wealth Management, coupled with an attractive valuation at 1.5x book value, contribute to TD Securities’ positive outlook on Manulife.

MFC:CA Ratings by Stock Target Advisor

Manulife Stock Analysis

Based on the Manulife Financial Corp stock forecast from 11 analysts, the average analyst target price for Manulife Financial Corp is CAD 30.58 over the next 12 months. This suggests a potential upside for investors based on the current market price. Manulife Financial Corp’s average analyst rating is “Buy,” indicating a consensus among analysts that the stock is expected to outperform.

Stock Target Advisor’s own stock analysis of Manulife Financial Corp is “Slightly Bullish,” reflecting a cautiously optimistic sentiment. This assessment is based on 8 positive signals and 5 negative signals identified by Stock Target Advisor’s proprietary analysis algorithms. While there are some negative indicators, the overall outlook leans towards the positive side, albeit slightly.

At the last closing, Manulife Financial Corp’s stock price was CAD 32.99, which indicates a notable increase compared to the average analyst target price. This suggests that the market currently values Manulife Financial Corp higher than the consensus target price, potentially signaling investor confidence or other market factors at play.

Manulife Financial Corp’s stock price has exhibited significant volatility in recent periods. Over the past week, the stock price has increased by +9.49%, indicating strong positive momentum in the short term. Similarly, over the past month, the stock has seen a substantial gain of +15.88%, suggesting a bullish trend over a slightly longer period. Looking back over the last year, Manulife Financial Corp’s stock price has appreciated by +21.87%, demonstrating robust long-term growth despite potential fluctuations in the market.

Overall, while analysts and Stock Target Advisor offer positive outlooks for Manulife Financial Corp, investors should consider the inherent risks and uncertainties associated with investing in stocks, including market volatility, economic conditions, and company-specific factors. Conducting thorough research and assessing individual risk tolerance are essential steps for making informed investment decisions.

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