Macquarie Group Ltd (ASX: MQG)

Macquarie Group Ltd is an ASX listed diversified financial services provider in Australia, the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It specialises in various services, including asset management, retail and business banking, wealth management, leasing, and asset financing, among others.

Recommendation Rationale – SELL at AUD 207.63

• Trading Around Resistance: MQG’s share price has surpassed the ‘Resistance 1’ level recommended on 15 May 2024; thus, share price retracement can be expected.
• Lower Earnings: During FY24 results, MQG witnessed lower earnings for the Commodities and Global Market business compared to previous year. Subsequently, operating income and earnings per share declined by 12% and 32% year-over-year, respectively.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/EBITDA, EV/Sales, Price/Earnings, and Price/Book) are higher than the median of Financials’ sector.
• Market Risk: As a global financial services provider, Macquarie Group is exposed to market fluctuations and economic cycles. Changes in interest rates, commodity prices, and global economic conditions can impact its performance.

MQG’s Daily Price Chart

 (Source: REFINITIV; Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY Mar'26E) (Illustrative)

MQG is expected to trade at a premium on the back of 10% CAGR in earnings per share since listing, diversified income streams, and investments made in FY24 across venture capital, growth equity, infrastructure development, among others. The following peers have been considered for conducting valuation: ANZ Group Holdings Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), and Judo Capital Holdings Ltd (ASX: JDO).

Given its current trading levels, decline in earnings, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 207.63, as of 29 July 2024 at 11:25 AM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 29 July 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.