Wells Fargo analyst Christopher Harris downgraded Legg Mason Inc. over a "challenging backdrop for revenue growth" even as the management has done an "admirable job" to reposition the business.
The company has undergone an aggressive cost savings plan, which is expected to generate at least $100 million in savings, and its stock price has witnessed "meaningful outperformance" year-to-date. Harris views the company as fairly valued.
Legg Mason has benefited from retail investors' allocation of capital to fixed-income asset classes, he said.
"We now have some concern that this may be as good as it gets for fixed income, which could be an issue as the rate of change of flows is a major factor that influences asset manager stocks," Harris wrote in a note. He downgraded Legg Mason to "market perform" from "outperform."
The analyst left his full-year EPS estimates unchanged at $3.26 for 2019 and $3.70 for 2020. There was also no change to the $43 price target.
