Last Update 08 Dec 25

Fair value Decreased 0.16%

STT: Future Fee Leverage And New CFO Moves Will Shape Returns

Analysts have nudged their fair value estimate for State Street slightly lower to approximately $130 per share from about $130.36, reflecting a modestly higher discount rate and fine tuned expectations for revenue growth, profitability, and future valuation multiples, amid broadly supportive Street target hikes that emphasize operating leverage and potential strategic upside.

Analyst Commentary

Bullish analysts are broadly constructive on State Street, pointing to a blend of equity market leverage, operating efficiency opportunities, and a refreshed leadership backdrop as catalysts that could unlock additional shareholder value beyond current expectations.

Across recent notes, target price increases and new positive ratings signal growing confidence that the company can translate higher market levels and disciplined cost management into better through cycle earnings power, even as the rate environment becomes more challenging.

Bullish Takeaways

Multiple target price hikes into the low to mid $130s and one significantly higher target imply upside to the current fair value. This reflects rising conviction in the durability of fee based growth and operating leverage.
Bullish analysts highlight that the shares screen inexpensive relative to peers, with valuation not fully reflecting prospects for improved profitability and a potential strategic reset under the new CFO.
Higher equity market levels are expected to support revenue through increased assets under custody and assets under management, providing a volume driven tailwind that could offset some macro headwinds.
Recent revenue outperformance is seen as evidence that State Street can execute in a mixed environment, reinforcing confidence in management guidance and medium term margin expansion.

Bearish Takeaways

Even bullish analysts acknowledge that lower interest rate expectations are a headwind for net interest income, limiting near term earnings growth and potentially capping upside to valuation multiples.
Some Street commentary suggests consensus estimates may not move meaningfully higher despite recent beats, pointing to a more balanced risk reward profile in the short term.
The stock has lagged broader market strength, which could reflect investor skepticism around the pace of profitability improvement and the execution risk embedded in any strategic shift.
Model updates incorporating multiple rate cuts over the next two years indicate that part of the rerating depends on fee income resilience and cost actions, leaving less room for execution missteps.

What's in the News

White House officials are weighing an executive order that could sharply restrict the influence of proxy advisory firms and curb index fund voting power, potentially limiting how large managers such as State Street vote client shares at U.S. companies (Wall Street Journal).
State Street opened its Middle East and North Africa regional headquarters in Riyadh, positioning Saudi Arabia as a strategic hub for directing and administering the firm's activities across the region in partnership with local authorities (company release).
The firm signed a strategic cooperation agreement with Albilad Capital under which State Street will support securities services in Saudi Arabia, aligning with Vision 2030 and reinforcing its long term commitment to the Kingdom's capital markets (company release).
State Street completed a substantial tranche of its share repurchase program, buying back more than 23 million shares since January 2024 and retiring roughly 8 percent of its share count for about $2.1 billion (company filing).
State Street Investment Management expanded its ETF lineup, launching ultra short duration Treasury and new target maturity bond ETFs, alongside an actively managed short duration investment grade public and private credit ETF, to broaden low cost and income focused offerings for fixed income investors (company release).

Valuation Changes

Fair Value Estimate was nudged slightly lower to approximately $130.14 per share from about $130.36, reflecting modestly updated assumptions.
The Discount Rate rose slightly to about 9.80 percent from roughly 9.74 percent, indicating a marginally higher required return.
Revenue Growth edged down fractionally to about 3.39 percent from approximately 3.39 percent, implying essentially unchanged top line expectations.
Net Profit Margin improved very slightly to around 24.14 percent from about 24.14 percent, signaling a minor uplift in profitability assumptions.
Future P/E ticked down marginally to roughly 12.0x from about 12.0x, suggesting an almost unchanged forward valuation multiple.

Growth in assets, fee revenue, and ETF strength positions State Street to capture wealth and retirement flows for sustained expansion.
Strategic investments in technology and operational efficiencies are driving cost savings, margin improvement, and deeper client relationships.
Rapid fintech innovation, fee pressure, regulatory demands, and shifts in settlement technology threaten State Street's revenue growth, market share, and capital flexibility if adaptation lags.

Catalysts

About State Street

Through its subsidiaries, provides a range of financial products and services to institutional investors worldwide.What are the underlying business or industry changes driving this perspective?

State Street is experiencing robust growth in global assets under custody/administration and assets under management, driven by strong new business wins, record net inflows-especially in ETFs and U.S. defined contribution channels-and fee revenue growth across core franchises, positioning the company to capture a greater share of rising global wealth and retirement savings, which should support sustained revenue and earnings expansion.
The acceleration of passive and ETF investing continues to benefit State Street's leading SPDR ETF franchise, as evidenced by significant inflows, expanding market share in low-cost products, and record trading volumes, which are expected to drive increased recurring management fees and higher operating margins over time.
Ongoing investment in technology, data analytics, automation, and the expansion of the Alpha platform are enabling higher productivity, deeper client engagement, and scalable solutions-leading to operational efficiencies, cost savings, and improving net margins, evidenced by over $1 billion of expense savings with a further $500 million targeted by year-end.
The increasing complexity of global and cross-border investments, coupled with market volatility, is boosting demand for State Street's scale, expertise, and ability to deliver end-to-end servicing, trading, and compliance solutions, anchoring recurring servicing fees and creating opportunities to grow revenue through both new and deeper client relationships.
Capital management discipline, including ongoing share repurchases and an 11% increase in dividends following strong stress test results, is likely to underpin continued EPS growth and support long-term shareholder returns.

State Street Earnings and Revenue Growth

State Street Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming State Street's revenue will grow by 3.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 19.8% today to 23.6% in 3 years time.
Analysts expect earnings to reach $3.5 billion (and earnings per share of $12.39) by about September 2028, up from $2.6 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.3x on those 2028 earnings, down from 12.1x today. This future PE is lower than the current PE for the US Capital Markets industry at 26.7x.
Analysts expect the number of shares outstanding to decline by 3.23% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.73%, as per the Simply Wall St company report.

State Street Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Accelerating adoption of blockchain and tokenization for settlement is acknowledged as a transformative trend with the potential to reduce demand for traditional custody and asset servicing, risking State Street's long-term relevance and revenue streams should the company fail to adequately adapt.
Ongoing fee compression, especially in passive and ETF investing, poses a significant challenge to management fee growth even as State Street gains market share, pressuring net margins and long-term earnings.
Prolonged or accelerating declines in global and regional interest rates, coupled with continued client migration toward lower spread and noninterest-bearing deposit products, would further erode net interest income, which is already being guided as flat to declining, limiting earnings growth.
Increasing regulatory pressures and the risk of higher capital requirements, especially around Tier 1 leverage ratios and risk-weighted assets, constrain share repurchase flexibility and could elevate compliance costs, impacting total capital returns and operating expenses.
Intensifying competition from fintechs, big tech, and outsourced technology vendors-especially in software/platform solutions-threatens State Street's market share, pricing power, and recurring fee revenue, while gaps in tech innovation or failed execution in platform integration could lead to higher expenses and lower net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $115.607 for State Street based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $131.0, and the most bearish reporting a price target of just $95.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $14.7 billion, earnings will come to $3.5 billion, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 9.7%.
Given the current share price of $112.05, the analyst price target of $115.61 is 3.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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