Abrdn share price is sinking: Is it a bargain or a value trap?

Abrdn (LON: ABDN) share price has been a major underperformer in London, where it has lagged the FTSE 100 and FTSE 250 indices. The stock plunged to a low of 154.95, the lowest level since November 2022. It has slipped by more than 32% from the highest level this year.

Challenging environment

Abrdn, formerly known as Standard Life Aberdeen, is one of the most prominent players in the UK financial services industry. It has over £368 billion in assets under management (AUM) and thousands of individual and institutional customers.

Abrdn and other companies in the industry in the UK like St James Place and Cazenove are going through a rough patch. UK regulators have implemented several rules that are set to have an impact on their profitability.

Abrdn has also been bleeding assets in the past few years. For example, the company had over £542 billion in 2021 and £368 billion at the end of the first half of the year. As a result, the company’s revenue and profitability have been under pressure since it makes most of its money from fees.

The most recent results revealed that Abrdn’ operating revenue for the first half of the year was £721 million, up from £696 million in the same period in 2022. Its cost-to-income ratio slipped slightly to 82% while its loss before tax narrowed to £169 million.

The concern for Abrdn is that it is facing substantial risks. Inflation in the UK remains at an elevated level and the recent stock market rally seems to be fading. Liquidity is drying as interest rates remain at their highest levels in years.

The past few years have been challenging for Abrdn and the turnaround strategy is taking longer than expected. As a result, the company’s valuation has slipped to £2.75 billion. At its peak in 2018, the company had a market cap of over $18 billion. Therefore, while Abrdn has become cheap, investing in it has risks.

Abrdn share price analysis

The daily chart shows that the Abrdn stock price has been in a strong sell-off in the past few months. In this period, it formed a death cross pattern, where the 50-day and 200-day moving averages make a crossover. Most recently, it dropped below the 61.8% Fibonacci Retracement level and the crucial support at 155.20p, the lowest level on September 7th.

Therefore, the outlook for the stock is still bearish, with the next level to watch being the 78.6% retracement point at 143.95p. The stop-loss for this trade will be at 160p.

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