Minor Upgrade Ahead of Thursday’s release of its fourth-quarter financial results, Scotia Capital analyst Mario Saric bumped up his Brookfield Asset Management Inc. target to US$70.25 from US$70 with a “sector outperform” rating. The average is US$69.79.
“BAM is down 9 per cent year-to-date (implied asset manager down 14 per cent), lagging peers by 3 per cent and extending under-performance during COVID,” he said. “We attribute the weakness to market concerns over inflation and higher rates. ... It is interesting to see BAM lag U.S. Financials despite the 49 basis points yield curve flattening since October 2021 (BAM has outperformed U.S. Financials 100 per cent of the time since 2010). We’ve talked about BAM’s higher balance sheet capital perhaps driving a bit of the discount to some peers (i.e. market preference for “capital-light” models). However, higher inflation could help BAM’s Invested Capital (i.e., BIP reported 9-per-cent year-over-year organic growth in 2021 on inflation indexation). Overall, we still view the 2022 macro as constructive for BAM share price outperforming broader benchmarks.”