Wells Fargo analyst Mike Mayo maintained a Buy rating on State Street (STT – Research Report) yesterday and set a price target of $91.00.
Mike Mayo has given his Buy rating due to a combination of factors surrounding State Street’s potential acquisition of Societe Generale’s custody unit. The acquisition is seen as a strategic move that would likely be accretive to State Street’s earnings per share (EPS). By capitalizing on State Street’s strong track record as a roll-up acquirer and its position as one of the top three global custody players, the purchase is positioned to leverage the company’s existing infrastructure and enhance profitability. The financial terms of the deal appear to be favorable, with indications that cost synergies could be realized, albeit with some challenges in the European market.
Furthermore, the integration of Societe Generale’s custody unit could add significantly to State Street’s assets under custody/administration (AUC/A), with an estimated 10-15% increase. The scale of the acquisition is likened to the previous Brown Brothers deal, suggesting a familiarity with such transactions and the potential for a smooth integration. The added assets would utilize State Street’s mostly fixed-cost infrastructure, which could lead to greater revenue without proportionate increases in costs. This ability to scale effectively and potentially realize higher margins in the long term underpins Mayo’s positive outlook on State Street’s stock.
In another report released on April 15, Barclays also assigned a Buy rating to the stock with a $102.00 price target.
STT’s price has also changed slightly for the past six months – from $67.260 to $72.810, which is a 8.25% increase.
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State Street (STT) Company Description:
State Street Corporation is a financial services and bank holding company. It provides a range of financial products and services to institutional investors worldwide including deposits, loans and lease financing, securities finance, trading services, portfolio modeling and construction, and wealth management solutions.
