According to a recent analysis by Morgan Stanley, Voya Financial is undergoing a significant turnaround, positioning the company for improved performance. Analyst Bob Jian Huang upgraded Voya's shares from equal weight to overweight, reflecting an increased confidence in the company's strategic direction. This upgrade also comes with a revised 12-month price target, which has been lifted by 14%, from $76 to $87, indicating a strong potential for growth in the near future.
This upgrade reverses an earlier decision in August when Voya was downgraded to equal weight due to concerns surrounding the long-term profitability of its health solutions business. Over the past year, Voya's shares have seen modest growth of less than 4%. However, Huang’s updated price forecast suggests a potential upside of over 23%, making it an attractive option for investors looking for opportunities in the asset management sector.
As of now, Voya's stock yields 2.55%, according to FactSet data. Huang attributes the recent underperformance of Voya's stock, in part, to a miss in the company's earnings for the full year of 2024. Although the stock is currently trading below its historical average, Huang notes that it is significantly less capital intensive, which could indicate a favorable shift in future performance. He emphasizes that the current valuation of Voya appears excessively punitive, not fully accounting for the company’s growth potential.
Despite the challenges, Voya Financial has made notable improvements in key financial metrics such as earnings per share (EPS) growth, return on equity (ROE), and capital intensity since the pre-COVID period. Huang pointed out that since the earnings miss in 2024, Voya's management has been proactive in implementing strategic measures aimed at enhancing performance. These include new pricing strategies and improved risk selection, which are expected to set the stage for a robust growth profile as the company approaches 2026 and beyond.
Looking ahead, Voya anticipates growth in its core business segments, particularly within wealth solutions and investment management. Recent acquisitions are expected to bolster excess capital generation in the upcoming year compared to 2024 figures. Huang argues that the ongoing turnaround will not only enhance the overall prospects of Voya but will also significantly improve its earnings potential.
In conclusion, the confidence expressed by Morgan Stanley in Voya Financial's management team suggests a positive outlook for the company as it navigates through integrations, investments, and necessary improvements across its segments. This strategic focus is likely to uplift capital generation and position Voya for long-term success in the asset management industry.
