Citi: Keep Selling WisdomTree, Competition Is Rising

• Shares of WisdomTree Investments, Inc. (NASDAQ: WETF) have declined almost 30 percent in the past three months, reaching a low of $15.635 on September 29.
• Citi’s William R Katz has reiterated a Sell rating on the company, while lowering the price target from $15 to $12.
• Katz believes that the intensifying competition could not only impact WisdomTree’s organic growth, it could put further pressure on the P/E multiple.

Analyst William Katz believes that while the company continues to be an “innovative platform” and has “done well” in garnering assets, cyclical pressures appear to be “building against flagship hedged currency platform,” with the “related flow weakness dampening lift elsewhere.”

In addition, Katz believes that competition is intensifying in the Smart Beta space, “calling into question subsequent growth and scarcity value assumptions.” Pricing competition is expected to rise with larger players entering this space.

The rising competition is also likely to lead to slowing organic growth, as compared to the last few years, “and thus likely capping, if not compressing, the P/E multiple,” the Citi report said.

The 2015-2017 EPS estimates have been lowered to reflect “real time AUM + flow updates plus our review of growth and margin assumptions, the latter coming under greater pressure as competitive forces build,” Katz added.