Investment platform owners Aberdeen Group PLC (LSE:ABDN) and AJ Bell PLC (LSE:AJB) could have further room to rise, said Deutsche Bank, lifting its target prices for both.
A re-rating among investment platform operators has boosted the value of Aberdeen's Interactive Investor (ii) business, analysyt David McCann said.
The bank's target price was lifted to 265p from 235p and a 'buy' recommendation on the shares was reiterated.
Analyst McCann said stronger trading performances among listed direct-to-consumer platform operators, particularly AJ Bell, had led to higher sector valuations and supported a higher sum-of-the-parts valuation for Aberdeen.
The ii platform, acquired in 2022, remains a key component of the investment case.
The analyst was also positive on AJ Bell PLC (LSE:AJB), raising its target price to 675p from 600p and maintaining a "buy" recommendation.
McCann said AJ Bell's increased spending on customer acquisition should be viewed as an investment rather than a drag on profitability.
He estimated the company spent about £314 to acquire each new direct-to-consumer platform customer in the first half, while a typical customer could generate roughly £230 of annual revenue over eight to nine years.
Deutsche Bank said recent customer growth suggested the strategy was working, with direct-to-consumer customer numbers rising at an annualised rate of 31% in the first half.
The bank added that strong transaction revenues and interest earned on uninvested client cash continued to support earnings.