St. James Place (LON: STJ) has become a fallen angel in the past few years as concerns about its business model, assets under management (AUM), and regulators jumped. It has moved from one of the most beloved UK financial giants into a struggling one. Along the way, its stock has crashed by more than 58% from its peak.
The rise and fall of St. James PlaceSt. James Place has had a great journey over the years. Started years ago in Cotswold Hills, the company grew rapidly to become the biggest wealth manager in the UK. It has over £158 billion in assets under management (AUM), bigger than other companies like Quilter.
The story has been different in the past few years as its market cap has crashed to £3.6 billion from a peak of £13.8 billion in 2022. Its revenue growth has dropped while actions of the Financial Conduct Authority (FCA) have forced it to slash fees.
Ironically, St. James Place woes have happened at a time when wealth management companies are doing well. For example, in Switzerland, UBS has grown to become the 19th biggest bank in the world because of its strength in the division. It has also helped Morgan Stanley become a bigger company than Goldman Sachs.
St. James Place investors have three key concerns. First, there’s the issue of its assets under management growth. In 2022, its gross inflows came in at £17 billion and analysts consensus estimates for 2023 and 2024 are £15.5 billion and £16 billion.
Analysts expect that its total funds under management ended the year at £161 billion and that they will rise to £173 billion. Total assets are important for a company like St. James Place because it mostly makes its money from fees.
The other concern is that the company decided to slash its fees last year because of the FCA’s rules on wealth managers. As such, the firm needs to continually grow its AUM to compensate the lower fees that it offers. It is unclear how these fees will impact the company but analysts expect that its underlying coash result will drop from £406 million in 2023 to £358 million in 2024.
Finally, there is the issue of costs, which have remained high as the UK has gone through a cost of living crisis. In 2021, the company laid off 200 jobs and there is a possibility that more layoffs are coming. Just look at Abrdn, another troubled company that is laying off workers to save £150 million.
St. James Place share price forecast
Meanwhile, St. James Place investors have another thing to worry about: its technicals. Turning to the weekly chart, we see that the STJ stock price has been in a strong bearish trend in the past few years. The shares have crashed below the 50-week and 100-week moving averages.
Most importantly, the stock has formed a bearish pennant pattern, which is a bearish sign. This pattern is characterised by a long line and a small triangle pattern. In most cases, this is one of the most bearish patterns in the market.
Therefore, the outlook for the shares is bearish ahead of the company’s earnings on January 25th. This view will be confirmed if the price moves below the key support at 602p and is in line with the last forecast. A move below that level will see it crash to 500p.
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