At time of writing, the share price of AMP Limited [ASX:AMP] is up 0.77%, trading at $1.97.
The AMP share price is up 25% from its all-time low of $1.57 on 10 October and its 20-day moving average has now crossed above its 50-day moving average:
Does this mean the AMP share price will go back up in sustained way? We conclude that due to the ongoing restructure of its business, there could be limited future upside to the stock until it has completed the sale of its life insurance business. Beyond that, macro headwinds point to a clouded future for the big players in financial services.
AMP share price has posted a heap of winning sessions but that may mean little
Of the last 37 trading days, the AMP share price has seen a remarkable 29 winning sessions.
On 7 November the Relative Strength Index (RSI) broke above 70 to 73.21, meaning it was in ‘overbought’ territory.
That didn’t stop AMP shares from continuing to rise in value and they hit a high of $2.03 cents on 15 November.
After being locked in a prolonged slide after the conclusion of the Banking Royal Commission, AMP shares are now down nearly 19% over the last 12 months.
But there are reasons to believe the recent rally is technical bargain hunting more than anything else…
Too many questions surround AMP…
It may play out like this…
AMP finally gets the sale of its life insurance business over the line, it gets a jolt of cash and can put more into revamping its wealth business.
The AMP share price then shoots up.
But how far?
The AFR reported on 22 November that by one portfolio managers reckoning, if AMP was to broken up, it has a value of upwards of $2.20 a share.
So there could be a cap on how far the sale of the life insurance business could take it.
Based on today’s share price, the cash injection may only take it up 10–20% or so.
Then where does it go?
Again, according to the AFR, AMP has already cut its buyer of last resort contractual payments by nearly 40% and has put in motions plans to sever ties with advisers, shift to a digital advice platform and refocus on the ‘higher end’ clients.
The cost of this reset may be as high as $1 billion.
This would be the majority of the $1.8 billion it hopes to get from the sale of its life business.
Not much left for the rebuild then.
As such, it would not surprise me if the AMP share price went sideways until the sale, gets a brief spike and then investors take that spike as an opportunity to get out.
Of course, this is just one scenario.
But longer-term, the macro picture for AMP involves challenger banks and array of innovative fintechs that may prove to be more agile than the ailing former giant.
We discuss an array of issues pertinent to the evolution of financial services in our Money Morning publication. If you are looking for a place to start learning about where to invest as we move into a post-Big Four + AMP world, it is a must read. Learn more about it here.
For Money Morning