What is the outlook for the Macquarie share price in May?

One broker is neutral on the bank and warns of downside risk to its earnings per share (EPS).

| More on:
Four ASX share investors in black suits hide behind trees with binoculars and other surveillance equipment, peeking out to see what's happening.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Macquarie Group’s share price outperformed all ASX big bank shares over the past two months
  • But this could be as good as it gets for Macquarie as UBS thinks all the good news is priced in
  • The broker also sees risk to its earnings if revenue from two of its key divisions normalises

The Macquarie Group Ltd (ASX: MQG) share price zoomed ahead of the ASX big four bank shares over the last few months, but some experts think its outlook is less certain.

Shares in the home-grown investment bank jumped over 13% in the past two months and closed at $203.43 yesterday.

Macquarie Group share price beating its peers

This compares with the National Australia Bank Ltd (ASX: NAB) share price gain of just under 11%. NAB was the strongest performer among the big four banks.

The Commonwealth Bank of Australia (ASX: CBA) share price added 8%, while the Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) share prices advanced around 6% each.

Outlook getting cloudier

But this could be as good as it gets for the Macquarie Group share price, according to UBS. The broker initiated coverage on its shares with a neutral recommendation and warned of downside risk to its earnings per share (EPS).

"One of the attractions of the MQG investment case is the diverse product and country mix split between annuity and risk based earnings streams, adding stability to the group's earnings profile," said UBS.

"MQG's revenue in the Macquarie Capital division (20% of group) appears elevated."

Macquarie's earnings risk building

This is because of investment income and gains on asset sales. Further, high merger and acquisition advisory fees and lower credit impairment charges also bolstered the division's revenue.

"As activity levels stabilize, we anticipate some revenue normalisation and a high water mark level for division profits," added UBS.

"CGM (40% of group) also has revenue streams which are episodic and difficult to forecast."

CGM is the group's Commodities and Global Markets division. It is benefitting from very strong commodity prices and high levels of volatility due to the war in Ukraine and other COVID-induced supply chain disruptions.

Reasons to like the Macquarie Group share price

However, UBS does acknowledge several positives that could attract investors to the Macquarie Group's share price.

"The group's value proposition to stakeholders is differentiated among global [investment banks], with a leading position in infrastructure investments and renewable energy, complimented [sic] by its top 3 global commodities franchise," said the broker.

"Tailwinds in alternative assets, integrated capabilities in renewables advisory, and a history of stable earnings and prudent capital management are all positives."

What are Macquarie shares worth?

Unfortunately, from UBS' perspective, the good news is already priced into the Macquarie Group share price.

The broker's 12-month price target on the shares is $205 a pop. That leaves little room for price appreciation.

On the other hand, not all brokers think the upside for Macquarie is lacklustre. JP Morgan is urging investors to buy Macquarie Group shares ahead of the company's profit results on Friday.

In early trade on Wednesday, Macquarie shares are climbing nearly 1% at $205.42.

Motley Fool contributor Brendon Lau has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking Corporation. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Financial Shares

Does Macquarie rate IAG Insurance shares a buy, hold or sell?

The insurer's share price has slumped this week.

Read more »

Worried woman calculating domestic bills.
Financial Shares

What's the outlook for household deposit growth for the big 4 banks?

Household deposit growth has accelerated over the past two years.

Read more »

A man looking at his laptop and thinking.
Broker Notes

After crashing more than 21% yesterday, does Macquarie rate Helia shares a buy?

Should I buy the big dip on Helia shares? Here’s Macquarie’s latest share price forecast.

Read more »

A man sitting at his dining table looks at his laptop and ponders the CSL balance sheet and the value of CSL shares today
Financial Shares

How much upside does Macquarie top for AMP shares?

Is the broker bullish or bearish on this popular stock?

Read more »

A man and a woman sit in front of a laptop looking fascinated and captivated.
Financial Shares

What's the hype around Generational Development shares?

Several fund managers have listed the share as their 'top pick'.

Read more »

Woman and man calculating a dividend yield.
Financial Shares

With a 3.8% dividend yield, does Macquarie rate QBE shares a buy, hold or sell?

Can QBE shares continue to outperform in FY 2026? Here’s Macquarie’s latest forecast.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Financial Shares

Guess which ASX 200 share is crashing 28% today

Why are investors rushing to the exits again? Let's find out.

Read more »