Macquarie stock forecast: MQG shares under pressure amid recession fears
Australian financial services provider Macquarie Group (MQG) has incurred steep losses so far in 2022, despite strong financials. The stock has been a victim of global turmoil amid the ongoing Russia-Ukraine war, high inflation, a failed takeover bid, and global central banks’ attempts to rein in the high consumer prices through tighter monetary policies.
Here we take a look at the firm’s latest performance and other news that are shaping the Macquarie stock forecast in 2022 and beyond.
What is Macquarie?
The Macquarie Group is an Australia-based global investment bank, financial and advisory services provider and fund management services. It is one of the world’s largest asset managers and mergers and acquisitions (M&A) advisors.
The firm was established in December 1969 after its predecessor, Hill Samuel Australia, decided to provide advisory and investment banking services of a global standard to the Australian market.
Shares of the Macquarie Group trade on the Australian Securities Exchange (ASX) under the ticker MQG. They were listed first on the ASX on 29 July 1996.
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Macquarie stock analysis
The MQG stock price pleased investors with hefty gains in the last decade, growing over 550% since January 2012, with 10-year annualised trailing returns of 20.89%, according to Morningstar.
It was a volatile ride. After achieving the record high of AUD$215 in January 2022, the share price plunged over 26% year-to-date as of 11 October. The loss, however, was in line with the broader market and the Australian benchmark index S&P/ASX 200 (AU200), where the stock is listed.
Macquarie's financials: Q1 and full-year
According to the first-quarter trading update released in September, the company’s financials continued to be in good health. The asset manager’s assets under management (AUM) remained at AUD773.9bn, broadly in line with full-year earnings released in March.
The banking and financial services sector saw 8% and 9% growth in home loans and total deposits respectively amid higher interest rate environment, which was partially offset by 10% loss in car loans.
The firm reported strong results across the commodities platforms driven by volatility, trading and client hedging opportunities. Strong client activity was also registered in foreign exchange, fixed income and credit products.
A research company CreditSights noted that “Macquarie has a good mix of businesses that are both profitable and oriented towards seizing low valuation/high volatility opportunities”.
In a note released on 15 August, the firm said that the group’s first-quarter trading statement indicated that business contributions were “either up or significantly up” from a year earlier.
“It has a significant resources and commodities-related business, but it has managed risks and returns effectively, and in FY22 and so far into FY23 has been a significant beneficiary of gas, power and resources volatility.
“The performance of FY22 won’t be repeated in FY23 since disposals are likely to be much lower. Capital is adequate and it holds a significant book of equity investments, but ALM is conservative. Its spreads offer value for its credit quality and so we have an Outperform recommendation on Macquarie Bank (MBL) and group bonds.”
Earlier in March Macquire posted a strong full-year earnings report, with profit after tax rising to AU$4.95bn, from AU$3bn a year earlier. The firm’s net operating income jumped to AU$17.32bn, from AU$12.77bn.
According to Macquarie, the higher income was a result of its “continued emphasis on areas underpinning long-term global economic growth”, the group’s adaptability in uncertain times, and its continuing commitment toward sensible risk management.
The company did not provide the overall guidance for the 2023 financial year, but noted that it will “maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment.”
High interest rates and inflation hurt MQG stock
Concerns of an impending recession have taken a toll on the broader market, including MQG stock. The inevitable monetary policy tightening, coupled with the high inflation globally, have led stock markets to heavily incur losses since the beginning of 2022.
The three major market indices in the US – the S&P 500 (US500), the Dow Jones Industrial Average (US30), the Nasdaq Composite (US100) – along with S&P/ASX 200 (AU200) in Australia, declined more than 9% on a year-to-date basis, as of 11 October. Violeta Todorova, senior research analyst at Leverage Shares, told Capital.com:
S&P/ASX 200 Index price
The Reserve Bank of Australia (RBA) decided to raise its cash rate target by 25 basis points (bp) to 2.60% at its October meeting to bring down soaring inflation. Although it was the sixth rate hike in 2022, it came lower than anticipated, according to Capital Economics’ group chief economist Neil Shearing:
“A smaller-than-expected increase in Australian interest rates was enough to raise hopes that global central banks en masse may be poised to pivot to a gentler pace of tightening. But Australia isn’t the US or the euro-zone and the RBA isn’t the Fed or the ECB: policymakers in Sydney have particular cause to let up now – including proximity to a flagging Chinese economy.
“With inflation still running hot in most other advanced economies, the immediate focus will be on continuing to deliver jumbo rate hikes in the months ahead. The pivot will come, but it won’t be until 2023”
The RBA was not the only major central bank to post back-to-back interest rate hikes this year. The US Federal Reserve (Fed) implemented four interest rate hikes in 2022, bringing the federal funds rate to the 2.25% to 2.50% range.
As a bank stock, Macquarie could benefit in an environment of higher interest rates, boosting the firm’s profits from lending margins.
But, this could be offset by the increasing risk of recession and weaker demand, according to Laith Khalaf, head of investment analysis at AJ Bell, as bank stocks are plugged into the overall economic cycle. He told Capital.com:
Failed takeover bid for Suez Recycling and Recovery UK
Another factor behind the MQG stock slump was losing a takeover bid for British waste management business Suez Recycling and Recovery UK in September. The group had sought to acquire the firm from French waste giant Veolia Environnement for AU$3.7bn.
However, a consortium of companies – Meridiam, Global Infrastructure Partners, Caisse des Depots Group, and CNP Assurances – exercised its right of first refusal, pushing Macquarie Group off the agreed acquisition deal, as reported by the Australian Financial Review on 23 September. The same group of firms in the consortium own Suez’s operations in France.
The MQG stock price fell over 9% in the four days following the announcement of the failed takeover bid.
Macquarie stock forecast for 2022 and beyond
Analyst ratings compiled by TipRanks shared a wide range MQG stock forecasts. The consensus rating was a ‘moderate buy’, based on six analyst views, as of 10 October. The 12-month target for the Macquire stock forecast was AU$196.81, ranging from AU$172 to AU$218.
Fitch Ratings upgraded its long-term issuer default ratings (IDR) of Macquarie Group and subsidiary Macquarie Financial Holdings.
The New York-based credit rating agency upgraded its IDR for Macquarie Group to A from A-, while also raising its IDR for Macquarie Financial Holdings to A from A-.
According to the algorithm-based Macquarie share price forecast from AI Pickup, as of 10 October, the Macquarie stock forecast 2022 could hit a high of AU$213.56, rising to AU$224.43 in 2023 and AU$232.22 in 2024. The site’s Macquarie stock forecast 2025 suggested that the stock could reach AU$237.94 in 2025 and AU$240.86 in 2028.
When looking for Macquarie stock predictions, it’s important to bear in mind that analysts and algorithm-based MQG stock forecasts can be wrong and shouldn’t be used as a substitute for your own research.
Always conduct your own due diligence on the stock before trading, looking at the latest news, a wide range of analyst commentary, technical and fundamental analysis. Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose.
FAQs
Is Macquarie a good stock to buy?
Whether Macquarie is a good stock to buy would depend on your risk tolerance, portfolio composition, investing or trading goals and overall strategy. You should always conduct your own due diligence before buying a stock.
Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose.
Will the Macquarie stock go beyond its all-time high of AU$215.73?
Analyst ratings compiled by TipRanks as of 11 October suggested a 12-month target for the MQG stock price of AU$196.81, ranging from AU$172 to AU$218. Note that their predictions can be wrong.
Should I invest in Macquarie stock?
Whether you should invest in Macquarie stock should depend on your personal circumstances such as risk tolerance, portfolio composition, investing goals and strategy. Always conduct your own due diligence on the stock before investing, looking at the latest news, a wide range of analyst commentary, technical and fundamental analysis. Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose.
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