Invesco: Shares Rally Above Resistance, Valuation Intriguing

Earnings season rolls on. The week of Jan. 23 features a diverse range of industries reporting Q4 results before the major market cap firms’ earnings cross the wires late this month and in early February. So far, aggregate earnings are verifying about 4% ahead of expectations, but the company beat rate is not particularly impressive. Wall Street bulls hope that this past quarter won’t be the first negative YoY earnings growth period since Q3 2020 – it will be a close call, it appears.

One under-the-radar capital markets stock reports on Tuesday, and I see improved conditions for the asset manager.

Earnings Ahead

According to Bank of America Global Research, Invesco (NYSE:IVZ) is a global asset manager with over $1.5Tn in AuM and more than 8,000 employees globally with a presence in over 20 countries. The company provides investment management services to institutional and retail clients across different asset classes including fixed income, equity, alternatives, balanced/multi-asset, and money market funds. In October 2020, activist investor Trian Fund Management (Trian) announced that it has acquired a 9.9% stake in Invesco.

The Georgia-based $8.7 billion market cap capital markets industry company within the Financials sector trades at a low 9.3 trailing 12-month GAAP price-to-earnings ratio and pays a high 4.0% dividend yield, according to The Wall Street Journal.

The firm’s AuM slipped 2% in December, as reported earlier this month, and just before that release, UBS cut its rating on IVZ to neutral while DB has a hold, too, on shares. Elsewhere in the sell-side space, Wells Fargo is bullish on the capital markets company.

On valuation, analysts at BofA see earnings having fallen by a massive 48% last year, but then recovering to a solid 10% to 12% growth rate in the next two years. The Bloomberg consensus is more sanguine compared to BofA’s outlook. Dividends, meanwhile, are seen as falling this year to $0.65 on an annualized basis but then bumping up in 2024. After a bruising decline, shares now appear decently priced, with both IVZ’s operating and GAAP P/Es in the single digits (the latest print on Seeking Alpha shows an 11.5 forward operating earnings multiple).

With double-digit growth and a single-digit P/E, the PEG is around or slightly under 1, which is attractive. Invesco’s price-to-book ratio has an A+ rating at just 0.59, too. Overall, earnings volatility could be behind the company, so I like where shares trade today.

Invesco: Earnings, Valuation, Dividend Yield Forecasts

Looking ahead, corporate event data from Wall Street Horizon show a confirmed Q4 2022 earnings date of Tuesday, Jan. 24, BMO with a conference call immediately after results hit the tape. You can listen live here. Invesco also issues January flows and AuM data in its interim report on Feb. 13.

Corporate Event Calendar

The Technical Take

Last year, I was bearish on Invesco amid a protracted technical downtrend that showed few signs of a bullish reversal. It took a plunge under $14 to establish a floor. Notice in the chart below that IVZ fell to its downtrend support line, followed by a sharp recovery on big volume. The stock eventually climbed above its downtrend resistance line and is now simply consolidating above the 200-day moving average. Meanwhile, the momentum RSI gauge at the top of the chart shows a more bullish zone between 40 and 90 ongoing.

What’s encouraging about recent price action is that the stock is holding above the 200-day, whereas previous attempts were repeatedly rejected. Moreover, I see some downside support with significant demand for shares in the $15 to $19 range as measured by the volume-by-price indicator on the left.

Overall, I like the bullish reversal. I would like to see the stock hold the $17 to $18 range. On the upside, the current pattern, if broken out from, could lead to a bullish price objective near $27.

IVZ: Shares Breakout Above The Downtrend

The Bottom Line

I like Invesco’s fundamental story better now than during Q3 last year. The technical picture has also markedly improved along with much stronger momentum. I’m reversing my sell to a buy on IVZ ahead of earnings on the 24th.