Artisan Partners Asset Management, whose stock has risen 65% since its March 7 IPO, was downgraded Tuesday to “neutral” from “buy” by Citi Research.
Despite above-average organic growth, the firm's strong track record in active equities and above-average yield, “APAM's valuation appears full,” according to a research note from William Katz, analyst at Citi Research.
The money manager's stock was priced at the IPO at $30, above the expected range of $27 to $29. It closed Tuesday at $49.57, up 5 cents, or 0.1%, for the day.
“We already pencil (in) solid organic growth assumptions as we continue to see APAM as among the few with favorable active equities new business trends,” Mr. Katz wrote. “No question, equity markets are tracing higher but with the 2,600 basis points of relative outperformance in May and nearly 5,400 bps since the March IPO, investors seem to have broadly discounted APAM's attractiveness.”
“There is no change to our $47 12-month target,” Mr. Katz wrote. However, Citi Research warned that the stock price could have difficulty reaching the target if equity markets decline, impacting performance and fees, and if redemptions increase.
The firm's IPO was seen as a success story that would increase the chances other money managers could issue their own IPOs. But since then, only ING U.S. issued an IPO, which was priced May 2 at $19.50, below its expected range of $21 to $24 a share, but the offering included ING's U.S.-based retirement and insurance business as well as money management.
In its first earnings statement issued April 30, Artisan Partners reported $83.2 billion in assets under management as of March 31, up 12% from three months earlier and 25% higher than the first quarter of 2012.