What’s the verdict for this banking giant?
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Macquarie Group Ltd (ASX: MQG) shares were strong in 2024 and finished the year with a gain of more than 20%.
Shares have climbed a further 5% in January after hitting lows of $218.90 last month, and currently fetch $232.95 at the time of writing.
But, as the saying goes, we don’t get paid for what’s already happened.
The big question for investors interested in buying Macquarie shares now is where the stock will be in the coming years. Let’s see what the experts think.
Good start for Macquarie shares in 2025
Macquarie shares have started the new year in the green. Part of this stems from last week’s announcement that the investment bank is set to invest in a large data centre in the United States.
The US$5 billion deal is with data centre construction and operations company Applied Digital.
It includes funding for high-performance computing (HPC) data centres in Applied’s HPC business. HPC has proven critical for the growth of the artificial intelligence (AI) industry.
As reported by my colleague Bernd, investors bid up the price of Macquarie shares following the announcement.
The group also booked a 14% growth in net profit for the first half of FY25 compared to last year, climbing to $1.6 billion. Meanwhile, assets under management (AUM) also rose to $916 billion.
Macquarie shares in three years: what’s possible?
No one has a crystal ball, much less so in financial markets. But we can make some informed judgements based on the available data.
Analysts are bullish on Macquarie’s growth route. The consensus of analyst estimates projects profits to grow by 40% profit growth in 2025, hitting $9.80 earnings per share (EPS).
This is expected to lift by another 22% the next year and 15% by 2027, reaching an EPS of $13.87 by then.
So the total expected change is about 42% from 2025-27 (three years inclusive of 2025).
Dividends are expected to grow as well, increasing by 6% to $7.20 per share in 2027.
Macquarie currently trades on a price-to-earnings (P/E) ratio of 23.4x, meaning for every dollar of the bank’s earnings, investors pay $23.40.
If investors continue to pay this multiple by 2027, and the bank earns $13.87 per share that year, the implied stock price is $324.55, or about 40% growth.
The investment result will closely match the business result, that is.
But say the valuation is tightened up to a figure of 18.5x, about 20% decline from the current P/E ratio. That would imply a stock price of $257.60, still about 10% growth from the current value.
There are no major estimates on what the P/E ratio might be in three years’ time.
But if we apply the current stock price to the estimated earnings of $13.87 per share in 2027, Macquarie shares trade on a three-year forward P/E ratio of 16.8x.
As such, there is a range of potential outcomes that depend on the overall market, Macquarie’s profits, and the price investors intend to pay for these in the future (i.e., the P/E ratio).
Are the experts bullish?
Experts are currently mixed in their views on Macquarie shares. On the broker side, CommSec data shows five buy ratings, five hold ratings, and two sell recommendations, making it a hold according to the consensus of estimates.
Ord Minnett rates Macquarie a buy. As my colleague James reported, the broker sees “significant opportunities” in growth markets like “green energy models and data centres.”
It values the stock at a price target of $245.
Meanwhile, as my Foolish colleague Tristan reported last year, UBS rates it a hold with a price target of $225.
Whereas fund manager Fairmont Equities sees value in Macquarie shares this year.
According to The Bull, Fairmont reckons the bank will benefit from the world’s major economies’ “strong growth in 2025.”
It says Macquarie is a buy for the next few years.
Foolish takeout
Macquarie shares are well positioned for growth over the coming years, according to experts covering the stock.
No one can predict precisely where it might be in three years. But the stock could trade higher if profits continue growing and valuations remain stable.
Time will tell what happens from here.
Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
