By:
Cameron Butler, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Envestnet, Inc. (NYSE:ENV) is a leader of unified wealth management
technology and services to financial advisors. The company’s technological
advancement joins and strengthens the wealth management processes delivering
flexibility, ease, precision, and performance. Envestnet solutions transforms
wealth management offering unprecedented opportunities for financial advisors
to deliver better outcomes.
• Technological
innovation has been, and will continue to be a leading focus of Envestnet into
the future.
• Now that the Yodlee
acquisition has been successfully integrated, the company is beginning to
understand how to use the data offered and create valuable information.
• The recent acquisition
of Wheelhouse has been an excellent complement to both the strategies of
Envestnet and Yodlee.
• 2017 will be a very
informative year as Envestnet slows down their acquisitions, realizes synergies,
and focuses on their organic growth.
Key
points: Technological integration is driving Envestnet’s new
focus. Envestnet will focus more on client satisfaction, providing clients with
cutting edge apps to help them better manage their investments and attain their
goals. Envestnet is still along the cutting edge of technology just as it was
in 2000 when their investment technology became the first to operate from the
cloud. Their continued strategic acquisitions of technology companies have
helped them to remain on the forefront.
The Yodlee acquisition has been successful, however
CEO Jud Bergman notes that Yodlee offered too much data, and they are now
focusing their efforts on gaining intelligence and information out of the
aggregated data. These analytics help derive key insights that advisors can use
to help the end client.
On the acquisition front, Envestnet acquired
Wheelhouse Analytics in 2016, a technology company that provides data
analytics, mobile sales solutions and online education tools to financial
advisors. The technology has proven valuable as it combines the analytical
tools of Wheelhouse with the Yodlee data solutions. Wheelhouse is a great
compliment to Envestnet as it empowers financial service firms with tools to
extract key business insights and evaluate data providing valuable information
to financial advisors within Envestnet.
In March of 2017, Envestnet won the Bank Insurance and
Securities Association Technology Innovation Award. This award recognizes companies
that are on the leading edge of technology within the financial services
industry. This award was presented to Envestnet during the annual BISA
convention in Florida on March 9, solidifying their role in technology
forefront.
Going forward, Management had noted in their annual report
that “2017 will be a year of execution including deriving solid organic growth,
addressing our identified obligations under Sarbanes-Oxley and delivering on
the strategic and financial opportunities with Yodlee.” 2017 should be a very
interesting year for the company, as we see how the synergies of the recent
acquisitions begin to pay off.
What
has the stock done lately?
Within the last two
months the stock is down approximately 11%. This may sound like a lot, but
within the last week the stock has been on the rise, increasing approximately
7%. The reason for the recent decline in stock prices within the last few
months is due to the lower than expected 2017 guidance. Revenue guidance is
lower for 2017 than in previous years at 12%-14%. These decreased growth
figures are probably attributed to the decreased number of acquisitions that
will be executed in 2017 as the company begins to focus on organic growth and
hopes to realize some of the synergies from the recent acquisitions. Overall,
the increased investor confidence in the short term is the main attributing factor
to the increase in the share price throughout the last week.
Past
Year Performance: Within the past
year the stock has fluctuated dramatically ranging between prices of $28 to
$40.82 per share. These fluctuations can be attributed to three things,
excellent earnings, poor guidance, and increased investor confidence. The
lingering uncertainty of what to make of the recent acquisitions has resulted
in the fluctuation of the share price over the last year.
Source:
FactSet
My
Takeaway
The recent acquisitions
have caused some speculation, but they complement Envestnet’s business strategy
very well. As the year progresses we should begin to see some of the synergies
from the acquisitions. This should lead to an increase in the stock price
within the next 52 weeks. As investors begin to gain confidence in management,
as well as the successful integration of the acquisitions, we should see the
share price start to rise as it has done within the past few weeks. Within the
next year look for the share price to continue to rise and rebound back into the
mid-$30 and lower-$40 range.
Source:
FactSet
