You'd be hard pressed to find a bigger serial disappointer in the wealth management space than AMP Limited (ASX: AMP) but the stock may just give investors something to smile about in the short-term, according to Morgan Stanley.
While many of its peers have run ahead as they capitalised on growth opportunities, AMP has been left in the dust with the stock barely at breakeven point over the past 12-months, when shares in IOOF Holdings Limited (ASX: IFL) are up 17% and Challenger Ltd (ASX: CGF) is 9% in the black.
Even the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is ahead by over 4%!
But there is a 60% to 70% chance that the tables will turn for AMP, at least in the short-term, according to Morgan Stanley.
The broker is expecting the stock to outpace the broader market over the next 60 days, thanks in part to low market expectations and its undemanding valuation.
All AMP needs to do is to deliver a full year result that is in-line with market expectations. How easy is that?
The average earnings per share (EPS) forecast for AMP for the year ended December 2017 is 35 cents while the EPS consensus forecast for 2018 is 36 cents.
All management needs to do is to assure investors that "it's steady as she goes" and that may be enough to win support for the stock.
Two other potential catalysts that Morgan Stanley is flagging are the reinstatement of AMP's $500 million share buyback and any positive development on the sale of AMP's life business when management reports its full year earnings this Thursday.
But the longer-term outlook for AMP is more uncertain and that is why the broker has kept its recommendation on AMP at "neutral" with a price target of $5.75.
While the stock does look attractively priced due to its underperformance, I am not sure what growth levers management can pull to trigger a fundamental re-pricing of the stock.
AMP is unlikely to find salvation in mergers or acquisitions like how IOOF has earned a re-rating from its purchase of Australia and New Zealand Banking Group's (ASX: ANZ) wealth business. The fact is, M&A has not been a path that has led to happiness for AMP's shareholders despite the company's market leading position in the industry.
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