UPDATE: UBS Downgrades Franklin Resources (BEN) to Neutral

UBS downgraded Franklin Resources (NYSE: BEN) from Buy to Neutral with a price target of $59. Analyst Brennan Hawken doesn't think the stock is a cheap as it looks, as its discount to peers may be structural.

"QTD performance in BEN shares has been solid, outperforming its asset management peers by a wide margin, as well as the S&P and XLF. Driving this recent outperformance has been strong EM performance and a decline in global bond yields. However, we see reasons to believe investor concerns over BEN may resurface, and more importantly, the stock may not be as cheap as it appears because we believe a component of its discount to peers is structural," said Hawken.

"BEN’s flows over the past 15 years have been highly reliant on a handful of successful strategies. While such concentrated growth certainly results in high incremental profit margins for those large products, it is our sense that they make investors uneasy about the stickiness and stability of that AUM. Therefore, we believe the fact that Franklin’s organic growth is consistently reliant on a small group of products could explain its discount to the group (which has persisted over the past 10 years)," added the analyst.

For an analyst ratings summary and ratings history on Franklin Resources click here. For more ratings news on Franklin Resources click here.

Shares of Franklin Resources closed at $57.84 yesterday.

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