'Better Late Than Never' To Buy T. Rowe Price, Analyst Says

After "warming-up" to T. Rowe Price Group Inc TROW over the past year, Credit Suisse is "finally pulling the trigger" on the stock.

The Analyst

Credit Suisse's Craig Siegenthaler upgraded T. Rowe Price from Neutral to Outperform with a price target lifted from $135 to $148.

The Thesis

The case for owning T. Rowe Price's stock is three-fold, Siegenthaler said in the upgrade note.

The company will likely see accelerating organic growth from 2 percent in 2017 to 4 to 5 percent in 2019 and 2020. This will be accomplished through CEO Bill Stromberg's "three-pronged attack," including:

Flow generation from Asia, Europe and the U.S. broker-deal channel;
New product sets including next-generation fixed income, concentrated equities and multi-asset; and
A strategy to offer more options to investors of all sizes and objectives outside of the mutual fund channel.

The company is likely to see its expense growth decelerate from more than 10 percent in 2017 and 2018 to around 6 percent in 2020, Siegenthaler wrote.

Although not central to the analyst's core thesis, T. Rowe Price's $2 billion in excess capital coupled with zero debt on the balance sheet could be used to gain "immediate scale" through an acquisition outside of the U.S. While the company can organically grow its business internationally, the analyst said a strategic investment would certainly "speed-up its effort."