TROW - T. Rowe Price (TROW) stock: staying on the sidelines in 2024
2023-12-29 10:50:30 ET
T. Rowe Price (NASDAQ: TROW) stock price continued to underperform in 2023 as concerns about its business continued. The shares were barely moved even as the S&P 500 index jumped by more than 25% and the Nasdaq 100 rose by over 50%. It also lagged behind other asset managers like Franklin Resources and Invesco.
T. Rowe price outflows to stabilise?
T. Rowe Price shares dropped as the company continued seeing net outflows during the year. It has lost funds for the past eleven quarters amounting to over $140 billion. This retreat has brought its total assets under management to $1.39 trillion, making it one of the biggest asset management companies in the world.
T. Rowe Price’s management believes that the worst is now over. In an interview with the Financial Times, the CEO said that he expects its business to stabilise in the coming quarters. He said :
“My sense is we are approaching the end of the more intense period of outflows. In certain, very visible, aspects it was a very disappointing year. In particular, the flow picture and the business that we lost.”
This view is supported by analysts at Citi, who exect that outflows will ease in 2024. In a note, the analyst expects that company’s adjusted EPS for Q4 will be $1.61, higher than Wall Street estimate of $1.47.
The company has come under intense pressure in the past few years. For one, many investors have been concerned about its portfolio underperformance. This issue was then compounded by the rising interest rate environment that pushed over $1.2 trillion in money market funds.
Most importantly, competition in the asset management industry has risen sharply in the past few years. For example, JPMorgan has launched several ETFs like JEPI and JEPQ that have attracted billions of dollars. Goldman Sachs has also launched its version of these active funds.
Additionally, many investors have moved to low-cost passive funds like State Street’s SPY and Invesco’s QQQ.
The most recent results revealed that the company’s net revenue rose to $1.7 billion, helped by a $1.4 billion increase in investment advisory. Its operating expenses rose to $1.1 billion. Expenses increased because of the company’s substantial severance costs as it slashed workers in July.
Is TROW stock a good buy?
I suspect that T.Rowe Price faces more headwinds in 2024 as competition in asset management rises. These are the same challenges facing other active money managers like Franklin Resources. Therefore, in terms of investments, I would stay in the sidelines and wait for more asset flow information.
From a technical standpoint, the TROW stock price has crossed the 200-day moving average, which is a positive sign. If the ongoing uptrend continues, the shares will likely retest the key resistance point at $126, its highest swing on February 2nd this year. This price is about 16.7% above the current level.
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