JP Morgan stays 'underweight' on Hargreaves Lansdown, Ashmore

JP Morgan reiterated its 'underweight' rating on Hargreaves Lansdown and Ashmore shares as the broker increased earnings estimates for European asset managers.

Based on rising asset prices since values plunged in March, JP Morgan increased earnings estimates for European asset managers by an average of 1% for 2020 and 3% for 2021. Environment, social and governance (ESG) assets also had strong inflows and this trend will persist, JP Morgan said.

JP Morgan analyst Gurjit Kambo repeated his 'overweight' recommendation on Germany's DWS because of its greater exposure to passive and alternative products and ESG. Hargreaves Lansdown and Ashmore's high valuations are not justified, he said.

Hargreaves Lansdown faces competition that could push revenue margins down in the medium term and this is not reflected in the share price, Kambo said. Ashmore's assets under management and seed investments benefited from positive market performance in the second quarter but this is captured in its valuation, he added.

"We retain our UW [underweight] on Ashmore and Hargreaves Lansdown as we continue to view the extent of the premium valuations vs the sector not fully justified," Kambo said in a note to clients.