Citi Double-Downgrades WisdomTree To Sell, Slashes Target To $15

• The share price of WisdomTree Investments, Inc. WETF has been declining for the past five days, dropping more than 25 percent since August 19.
• Citi’s William R Katz has downgraded the rating on WisdomTree from Buy to Sell, while lowering the price target from $30 to $15.
• Although the long-term story remains intact, Katz expects 20 percent correction potential for the stock, which has declined sharply in recent times and could see further multiple compression.

While other Asset Managers have also seen a sharp decline in share price, month to date, Katz expressed some concern regarding WisdomTree’s flow story, which appears to be deteriorating, with key indicators softening quickly.

In addition, there appears to be increasing margin pressure, driven by the rapid AUM decline and higher spending, along with an unfavorable fee rate shift. Katz also stated that the multiple could compress going forward, while the management has stepped up selling.

Also, “with US rate expectations deteriorating, it seems relative appeal for Currency-Hedged products is diminishing, creating a negative second derivative against a still high-PE multiple stock,” the Citi report said.

According to Katz, “[P]ossible attrition risk; absence of another killer product near term; more entrants into “Rules Based” market; and higher market uncertainty argue for a lower target P/E – particularly as Traditional multiples are collapsing.”

The EPS estimates for the company have been lowered.