UBS upgrades 2 beaten-down ASX wealth stocks to Buy, downgrades AMP

Parts of Australia's wealth management sector have taken a beating since the May Federal Budget, but UBS believes the sell-off has created an attractive buying opportunity for investors willing to look beyond the near-term headwinds.

In a research note published on 7 October, UBS analysts upgraded HUB24 (ASX: HUB) and Netwealth (ASX: NWL) from Neutral to Buy, arguing that their long-term growth prospects remain intact despite weaker fund flows and rising bond yields.

Both stocks have underperformed the broader market since the Budget, but UBS believes investors may have become overly pessimistic, arguing that the tax changes could actually drive more money into superannuation over the longer term.

"... with Budget-related tax changes improving the relative attraction of superannuation as a long-term savings vehicle, we believe longer-term structural growth underpins for specialty platform provides (SPPs) HUB & NWL remain intact and with shares having underperformed the market 21%/23% since the May budget," analysts Kieren Chidgey, Fraser Noye and Zoey Chen wrote.

Meanwhile, AMP (ASX: AMP) has been downgraded from Buy to Neutral following its blistering rally.

Here, I dive into the three calls.

1. HUB24: A quality growth stock at a rare discount

• Rating: Buy (upgraded from Neutral)
• Price target: $77.35 | Implied upside: 22%

HUB24 shares have fallen approximately 34% year-to-date, with its forward price-to-earnings multiple contracting from around 56 times to 33 times. That leaves the stock trading at a roughly 30% discount to its five-year average valuation.

UBS believes the correction has created an attractive entry point into one of Australia's highest-quality wealth management businesses.

Despite weaker near-term flows, HUB24 continues to grow its financial adviser network at approximately 11% annually, while its platform now reaches around 38% of the industry.

The broker also highlights HUB24's leading position in managed accounts and consistently strong adviser satisfaction rankings.

"HUB is growing its advisers at a double-digit rate, which leads a a strong multi-year flow outlook as advisers transition their books. HUB has ranked #1 across external platform benchmarking surveys as the platform of choice, and as advisers consolidate their platform usage HUB is best placed to expand fund flows," the UBS analysts said.

UBS expects the company's platform EBITDA margin to approach 50% by FY31, supported by continued market share gains and operating leverage.

While its price target has been reduced from $83.50 to $77.35, the broker sees substantial upside from current levels.

2. Netwealth: A correction creates an opportunity

• Rating: Buy (upgraded from Neutral)
• Price target: $22 | Implied upside: 30%

After a similar fall to its competitor, Netwealth now trades on around 29 times forward earnings, representing a 40% discount to its historical relative valuation.

UBS believes this more than compensates investors for weaker margins and near-term fund flow pressures. And while Netwealth trails HUB24 in adviser growth, the broker believes its organic growth prospects remain strong, with the potential to "get close" to doubling its market share over the next five years.

However, that growth comes at a cost, with Netwealth increasing investment in technology, distribution and new opportunities across broking, private wealth and adviser workflow tools such as Paradino.

UBS expects EBITDA margins to decline from approximately 49% in FY26 to around 45% in FY27, including the impact of Paradino. Nevertheless, the broker believes this is a worthwhile trade-off.

"While management has reset expectations around margin expansion, prioritising growth through product, technology and distribution investment, we view this as a rational trade-off given the scale of the addressable opportunity."

Its revised $22 price target, down from $24, implies approximately 30% upside.

3. AMP: The easy money may have been made

• Rating: Neutral (downgraded from Buy)
• Price target: $2.61 | Implied upside: 3%

While HUB24 and Netwealth have struggled, AMP has enjoyed quite the turnaround.

Its shares have nearly doubled since February, supported by improving wealth platform flows, stronger earnings from its Chinese pension partnerships and expectations of further capital returns.

UBS believes AMP's Chinese joint ventures could grow profits by 10–15% annually over the longer term, and it also anticipates another $300 million in share buybacks during FY27.

However, UBS believes much of the good news is already reflected in the share price.

"With the share price +96% since Feb-26 alongside a PE re-rating from ~11x PE to ~16x PE today, we believe much of the improvement in fundamentals is now reflected in the share price," the UBS analysts said.

"While capital management should continue to provide support, risk-reward appears more balanced and we move to Neutral."