SEIC: Deal Pipeline Strength and Margin Discipline Will Drive Shares Higher

Analysts have adjusted their price target for SEI Investments slightly downward from $96.71 to $96.00, reflecting updated views on margin expansion and near-term performance.

Analyst Commentary

Recent analyst reports highlight diverging perspectives on SEI Investments, providing insight into both optimistic and cautious views regarding the company's outlook and valuation.

Bullish Takeaways

• Bullish analysts point to a robust deal pipeline. This remains strong even in the face of short-term sales declines, supporting the company's potential for future growth.
• Expectations are for net recurring sales activity to re-accelerate in the upcoming quarter. This indicates improved top-line momentum.
• Improved sales activity combined with careful expense management is seen as laying a path for substantial long-term margin expansion and higher profitability.
• Upward adjustments to price targets reflect confidence in SEI Investments' execution capabilities and ability to capture long-term value.

Bearish Takeaways

• Bearish analysts note that recent sales performance has declined. This raises concerns about the pace of growth in the near term.
• Margin expansion is seen as potentially limited in the short run, which could cap upside to earnings and valuation.
• Lowered price targets signal some reservations around short-term execution and the sustainability of prior growth trends.
• Uncertainties regarding the effectiveness and timing of new client acquisition efforts present risks to achieving targeted growth rates.

What's in the News

• Clermont Trust USA is now live on the SEI Wealth Platform, utilizing a streamlined model for regional and community banks and trust companies managing less than $1 billion in assets. The platform is designed to enhance technology and operational efficiency for smaller institutions. (Client Announcements)
• SEI completed a significant share repurchase, buying back 1,572,000 shares valued at $140.55 million. This contributes to an ongoing buyback initiative totaling nearly $5.7 billion since 2005. (Buyback Tranche Update)
• SEI was selected by H.I.G. Capital to provide fund administration and depositary services for Luxembourg and Cayman Island-based private equity and infrastructure assets. This supports integration and enhanced data transparency. (Client Announcements)
• Through a new partnership with Graphene, SEI is powering a fully integrated wealth management infrastructure for wealth managers and family offices in the U.K. This move is in conjunction with a strategic investment by SEI Ventures. (Client Announcements)
• SEI launched the SEI DBi Multi-Strategy Alternative ETF, reorganizing an existing mutual fund structure to offer cost-efficient alternative investment strategies with quantitative, rules-based management. (Product-Related Announcements)

Valuation Changes

• Consensus Analyst Price Target: Lowered slightly from $96.71 to $96.00, reflecting modestly revised expectations for SEI Investments' fair value.
• Discount Rate: Reduced from 8.04% to 7.97%, indicating a marginal decrease in the risk premium applied to future cash flows.
• Revenue Growth: Adjusted downward marginally from 6.14% to 6.10%, suggesting slightly softer top-line growth projections.
• Net Profit Margin: Increased from 28.50% to 29.03%, pointing to improved cost efficiency or profitability expectations.
• Future P/E: Lowered from 17.69x to 16.13x, which reflects a more conservative outlook for share valuation on a forward earnings basis.