St. James Place (LON: STJ) share price collapse gained steam on Wednesday as concerns about the wealth manager continued. The stock crashed by over 30% and reached a low of 412p, its lowest level since June 2016th. It has plunged by over 73% from its all-time high.
Weak earnings and dividend cutSt. James Place shares nosedived after the company published weak financial results, confirming that its business is still struggling.
Its annual results revealed that its total funds under management rose to £168.2 billion as its net inflows came in at £5.1 billion.
While these headline figures are still strong, the situation is not all that good beneath the surface. In the first place, the company made a £438 million provision to fund customer refunds. Most importantly, the firm decided to slash its dividends from 23.8p in 2023 to 18p.
St. James Place’s profitability has also been affected recently. Its underlying post-tax cash result dropped from £410 million in 2022 to £292 million in 2023 even as its FUM rose.
The profitability dipped because of what the management called ‘short-term challenges.’ Also, the recent decision to slash the fees it charges customers has impacted its profitability.
These results are a validation to what the company’s short-sellers have long argued. Shorts believe that the company’s business is fundamentally broken and is being affected by the rising demand for passive funds.
Also, shorts believe that the actions of the regulators is impacting wealth managers and even asset management funds. Just this week, Abrdn reported that its outflows continued in the fourth quarter.
Therefore, St. James Place stock price recovery will depend on whether the company manages to grow its funds under management. That growth will then lead to higher revenues and profits since the company has slashed the amount of fees it charges customers. It also needs to cut costs.
St. James Place share price forecast
Looking at the weekly chart, we see that the STJ stock price has been in a strong sell-off in the past few months. On Wednesday, the stock moved below the two support levels at 596p and 524p, the lowest point on October 23rd and March 16th 2020. This price action was in line with my recent prediction.
St. James Place remains below all weekly moving averages. At the same time, the Relative Strength Index (RSI) and the Stochastic Oscillators have dived below their oversold levels.
Therefore, the outlook for the stock is still bearish since the company faces no possible catalyst for now. I expect that demand from short sellers will increase. This means that it could drop to 350p in the coming weeks.
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