AMG Options: Riding the Bullish Momentum in 2025?

AMG is a strategic partner to leading independent investment firms globally, referred to as 'Affiliates'. The company invests in these partner-owned firms through a partnership approach, allocating resources to areas of high growth and return. AMG's Affiliates manage differentiated strategies across alternatives (including private markets and liquid alternatives) and differentiated long-only assets (including equities and multi-asset and fixed income). AMG targets institutional and wealth clients globally, with certain Affiliates also providing investment management and customized investment counseling and fiduciary services to high net worth individuals and families. AMG differentiates itself by providing Affiliates with strategic capabilities such as access to growth capital, product strategy and distribution through its capital formation capabilities, succession planning, and strategic advisory, while preserving their autonomy and independence. This allows Affiliates to expand their reach and diversify their businesses.

AMG's short-term outlook is slightly positive. The primary driver is the Q3 earnings report, which reveals an EPS beat of $6.10 versus the expected $5.89. This represents a significant 26.56% increase over the previous year's earnings. While the EPS beat is a positive signal, the sales miss of $528 million compared to the $543.389 million estimate tempers the enthusiasm. The market's reaction will likely weigh the EPS beat against the sales shortfall. Given the magnitude of the EPS beat and the general positive sentiment often associated with exceeding earnings expectations, a slightly upward directional movement is anticipated in the short term. The absence of any significant macro news further emphasizes the importance of the company-specific earnings data. However, the sales miss prevents a more bullish outlook, suggesting a cautious approach to options trading.

AMG's technical outlook is moderately bullish. The price has generally trended upwards over the past 90 days, with some pullbacks. The price closed recently at $251.57, which is significantly above its 50-day SMA of $236.72 and its 200-day SMA of $196.16, indicating a strong upward trend. The 21-day EMA is $239.93, further supporting this short-term bullish momentum. While recent price action shows a slight pullback from a high of $256.81 on November 3rd, the overall trend remains positive. Momentum indicators present a mixed picture; the RSI_14 at 67.61 suggests moderately strong buying pressure, though not overbought. The MACD at 2.20 is above its signal line (MACDs at 1.47), indicating bullish momentum, however, the MACDh has been declining, signaling a potential weakening of this momentum. Stochastic Oscillator shows STOCHk at 56.93, and STOCHd at 46.83, indicating a potential for further upside. The ADX is 19.35, suggesting the trend is not particularly strong. Overall, while there are some signs of weakening momentum, the prevailing trend and positioning above key moving averages point to a moderately bullish outlook for the next 1-3 months.

AMG's MD&A presents a somewhat mixed picture. Aggregate fees for the three months ended June 30, 2025, increased by 7% to $1,173.5 million, driven by a 10% increase in asset-based fees. However, performance-based fees decreased by 3%, primarily in liquid alternative strategies. Looking at the six-month period, aggregate fees decreased by 5% to $2,443.9 million, with a significant 10% drop in performance-based fees offsetting a 5% rise in asset-based fees. 'Net income (controlling interest) decreased $69.2 million or 31% for the six months ended June 30, 2025'. Cash flow from operating activities for the six months was $439.7 million. The company expects its 'current cash balance, cash flows from operations, and borrowings under our senior unsecured multicurrency revolving credit facility' to be sufficient for the foreseeable future. However, the impairment assessment of indefinite-lived acquired client relationships led to an expense of '$59.2 million attributable to the controlling interest ($70.0 million in aggregate)' due to declining assets under management, suggesting potential headwinds.

AMG's Q2 2025 earnings call paints a moderately bullish picture, primarily fueled by strong growth in alternative investments. The company reported a 'strongest net flow quarter in more than a decade,' with $8 billion in net client cash inflows, driven by record net flows of $19 billion in alternatives. Management highlighted the ongoing shift towards secular growth areas, particularly private markets and liquid alternatives, noting that alternatives now contribute 'more than 55% of our EBITDA on a run rate basis.' The company also completed an investment in Verition and announced a new partnership with Montefiore, expanding its footprint in the private equity space. Dava Ritchea guided for Q3 adjusted EBITDA between $230 million and $240 million and economic earnings per share between $5.62 and $5.87. Jay Horgen specifically called out Pantheon and AQR, expecting both to be 'double-digit contributors to our earnings this year,' driven by tailwinds in the wealth channel and innovative tax-aware solutions. While there were $11 billion in outflows in active equities, the overall tone of the call was positive, emphasizing the company's strategic evolution and growth potential.

AMG's financial performance presents a mixed picture with some concerning trends. Revenue has fluctuated, starting at $499.9M in Q1 2024 and reaching $524.3M in Q4 2024, before declining to -$989.8M in Q3 2025, indicating significant volatility. The gross profit ratio also experienced fluctuations, peaking at 0.57 in Q3 2024 and then dropping to 0.50 in Q3 2025. Operating cash flow has been positive, with the latest quarter, Q2 2025, showing $230.8M. Total debt has remained relatively stable around $2.5B-$2.6B. The negative revenue in the most recent quarter is a major red flag, overshadowing the positive operating cash flow and stable debt. This inconsistency and recent decline suggest potential issues with revenue generation and overall financial stability in the short term.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting effective cost management. Return on Equity (ROE) has improved, showcasing efficient capital allocation. While the Price-to-Earnings (P/E) ratio is elevated, it is potentially justified by the company's growth prospects. The Debt-to-Equity ratio has decreased, reflecting a healthier balance sheet and reduced financial risk. The current ratio is at a healthy level, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable combination of growth, profitability, and balance sheet strength, supporting a positive outlook for the next 12 months, although the high P/E ratio warrants close monitoring.