Federated Hermes (FHI) Stock Forecast & Price Target

Federated Hermes has reported $843.7 billion in managed assets, with a significant concentration of 75% in money market funds, which is anticipated to generate approximately 52% of the company's revenue this year. The firm is expected to benefit from increasing institutional investor demand for money market funds as the Federal Reserve is projected to cut short-term rates, alongside a positive outlook for equity organic growth driven by better-than-expected equity net flows. Additionally, there are long-term growth opportunities within alternative strategies, further enhancing Federated Hermes's market position and revenue potential.

Federated Hermes experienced long-term net outflows of $466 million, which were weaker than anticipated, primarily driven by higher than expected fixed-income net outflows, despite stronger equity inflows. The company's revenue is heavily reliant on cash-management operations, expected to contribute 52% of total revenue, raising concerns about vulnerability to interest rate risks, particularly given the potential for lowered yields in money market funds due to low short-term rates. Additionally, an industry-wide shift toward passively managed products poses a long-term threat to Federated Hermes's actively managed assets under management (AUM), potentially leading to a continued decline in overall AUM and revenues.