Berenberg ups AJ Bell price target, says shares reflect value

AJ Bell's "decent growth" disappointed investors and the company's share price is in line with its growth potential, Berenberg said as it nudged up its share price target for the investment platform.

The company's shares fell after its second-quarter trading update because, though assets of £65.2bn were in line with Berenberg's expectations, the market was looking for stronger inflows, Berenberg said.

AJ Bell's first-half results, due on 27 May, should be "robust', Berenberg said. Performance was helped by high trading and commission during the Covid-19 lockdown and rising markets though Berenberg said commission growth would probably moderate.

The broker increased its estimate for AJ Bell's earnings per share by 8% and its share-price target to 420p from 400p while sticking to a 'hold' rating.

Organic growth is "robust" but may be slowing and with the UK lockdown due to end in June there could be a "negative shift" as customers spend less time on their investments, Berenberg said. The addition of about 34,000 customers in the second quarter, almost twice the level in the previous quarter, should provide support, it added.

"AJ Bell's shares traded down c6% post the trading statement, but still trade on c40x [earnings]," Berenberg analyst Jonathan Richards wrote in a note to investors. "We view the company's valuation as adequately reflecting the strong growth prospects, hence our 'hold' rating."

AJ Bell shares fell 1.3% to 435.20p at 10:48 BST.