Morgan Stanley Raises Franklin Resources Target Price 36% on Better-Than-Expected Fund Flows

Morgan Stanley has revised its target price for Franklin Resources Inc. (BEN.US) from $14 to $19, while keeping its "underweight" rating. This adjustment comes after Franklin Resources reported its second-quarter financial data for the fiscal year 2025, which showed a long-term funds outflow of $90 billion, with an annualized decrease of 2.5%. This figure was significantly better than Morgan Stanley's earlier projection of $140 billion and the market's general expectation of $180 billion. Excluding Western Asset Management, the long-term net fund inflow was $80 billion, with an annualized increase of 2.2%.

The second-quarter long-term fund flow situation for Franklin Resources showed improvement compared to the first quarter, which saw a net outflow of $262 billion. However, it worsened compared to the same period last year, which saw a net outflow of $32 billion. As of June 30, 2025, Franklin Resources' long-term asset management scale was $1.534 trillion, an increase of 2.1% from the previous quarter and a decrease of 3.0% year-over-year. This figure was 0.7% or $113 billion higher than Morgan Stanley's previous estimate.

In June, the company experienced a net outflow of $7 billion in long-term funds, compared to Morgan Stanley's expectation of a $53 billion outflow. In May, there was a net inflow of $14 billion. Considering the pressure of organic growth and long-term challenges, Franklin Resources' expected price-to-earnings ratio is 7.8 times, lower than its peers. The fixed-income subsidiary, Western Asset, faces challenges, a decline in balance sheet capabilities, and poor performance of key funds, which may continue to hinder Franklin Resources' organic growth in the longer term.

Franklin Resources is a global investment management institution, with its subsidiaries operating under the name Franklin Templeton, serving clients in over 150 countries. The company's performance in the second quarter reflects a mixed picture, with some improvements in fund flows but ongoing challenges that could impact its future growth prospects. The upward revision in the target price by Morgan Stanley suggests a more optimistic outlook, despite the "underweight" rating, indicating that the company's current valuation may not fully reflect its potential for recovery and growth.