AMP Ltd (AMP)
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Why Trade AMP Ltd. Shares?
AMP’s Share price rallied considerably in 2024, adding 70% and eclipsing the 7% gain achieved by the ASX 200, a benchmark index for Stocks. Upward momentum has continued so far this year, with the Stock rallying more than 10% and reaching multi-year highs of A$1.79.
Such robust growth raises questions about whether AMP Shares are worth adding to the watchlist at current levels. Despite the Stock being entrenched in a multi-decade downtrend, price action has demonstrated strong signs of bottoming out since early 2020, forming what many technical analysts will recognise as a double-bottom pattern between 2022 and 2023.
Investors also cheered the company’s positive half-year update (six months to 30 June 2024), reporting a 5.4% increase in underlying net profit after tax, reaching A$118 million. While total revenue decreased by 4% to A$641 million, the company saw a 4.1% rise in earnings before interest and taxes (EBIT), which reached A$153 million. Despite the revenue dip, AMP also declared an interim dividend of 2 cents per Share, reflecting its continued commitment to delivering value to shareholders. The positive profit growth and dividend payout highlight AMP’s resilience in navigating challenges in the financial sector.
What Influences the Price of AMP?
- Earnings
Corporate earnings are one of the most significant drivers of volatility in the Stock market. At its core, AMP’s earnings report summarises the company’s performance over the previous quarter and provides ‘Forward Guidance’ – a company’s outlook and forecasts. Investors vigorously monitor these releases for signs of outperformance (underperformance) and trade accordingly. An earnings report that surpasses (falls short of) analysts’ expectations will generally fuel a bid in the (weigh on the) company’s Share price.
- Economy
An economy growing with low unemployment and stable prices (inflation) will likely bolster demand for Stocks. Economic growth drives demand for financial services like wealth management, insurance, and superannuation, benefiting companies like AMP. Conversely, an economy that is underperforming or even experiencing a recession tends to prompt investors to sell Shares amid fears of depressed earnings. Central bank monetary policy, inflationary effects, and investor sentiment toward the financial sector can also significantly affect the Share values of a company such as AMP.
- Market Sentiment
How investors perceive a company can noticeably impact its Share price; bullish (bearish) market sentiment about a particular Stock may strengthen (depress) price action.
Investors who believe in AMP's long-term strategy and growth potential are more likely to buy and hold its Shares. On the other hand, negative market perceptions – whether due to concerns over management, competitive pressures, or past controversies – can lead to a sell-off in AMP’s Shares. Media coverage, analyst ratings, and social media discussions can all influence how investors view the company.
- Regulatory Changes
Changes in regulatory policies or government regulations can directly impact AMP's business operations. Stricter regulatory requirements may increase compliance costs or affect revenue streams, while favourable regulatory changes could provide growth opportunities.
Any significant regulatory shift, such as changes to retirement policies or taxation, can also lead to fluctuations in AMP's Stock price.
- Competitive Landscape
AMP operates in the highly competitive financial services sector, with numerous players offering similar products in wealth management, insurance, and superannuation. The company's ability to maintain or grow market share in these areas is critical for its Stock price performance. New entrants, changes in competitive dynamics, or innovations by competitors can all impact AMP's business prospects. If AMP fails to adapt to shifting market trends or faces stronger competition, it may experience slower growth, which could negatively affect its Stock price.
How To Trade AMP Ltd. (AMP) CFDs?
With the AMP Stock trading at multi-year highs, investors will likely be monitoring its Share price closely. How an investor trades AMP will differ and depend on several factors, including trading style and the strategies employed.
If you are new to investing in the financial markets, the FP Markets Academy can help you learn how to trade Share CFDs (Contracts for Differences). This space is designed with the trader and investor in mind, providing easy-to-follow articles and video guides.
CFDs are a unique and cost-effective way of investing and hedging across all key asset classes. They enable investors to ‘take a position’ in a market without taking on physical ownership of the underlying asset, which includes individual Stocks, such as AMP. Investing through CFDs involves two parties agreeing to exchange the difference between a trade's opening and closing prices. In addition, CFDs are regularly traded with leverage (margin), meaning CFD investors can increase their position size with only a fraction of the total investment value.
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AMP Ltd (AMP) Trading FAQ
While AMP may offer the potential for steady returns, backed by its strong presence in the Australian financial services sector, it is important to understand that regardless of the Stock’s performance or what analysts are forecasting, an investor must be guided by a defined investment strategy, complete with a risk management approach and specific goals.
According to analysts polled by Reuters, 20% recommend a Buy, 60% a Hold, and 20% a Sell.
The current mean price target for AMP is A$1.51.
Investors can gain exposure to AMP’s price movement without committing the full capital needed to purchase physical shares when trading AMP Share CFDs. This is achieved through leverage, where a fraction of the total position value, referred to as the margin, is required. In contrast, buying physical shares generally necessitates paying the complete market price to own the shares outright. Investors usually do this through a cash account.
With Share CFDs, investors can also easily trade rising and falling markets. While you can also do this with physical shares, the procedure for selling shares is slightly different, involving borrowing shares from your broker.
Additional considerations are tax advantages; however, this may differ depending on which country you are trading from. Share CFD trading is also more popular with short- and medium-term investors, while physical Shares tend to appeal to longer-term investors.
When trading AMP Share CFDs, leverage and margin are two primary components that allow investors to control larger positions with less upfront capital. Leverage increases your exposure to AMP's share price by enabling you to trade a larger position with a smaller investment. For example, with 5:1 leverage, you can control a A$5,000 position on AMP by 'putting up' A$1,000. The US$1,000 you put up is the initial margin to open a trading position and is what allows you to leverage your exposure.
For example, if AMP trades at A$1.58 per Share, purchasing 1,000 shares would require an initial investment of A$1,580 (A$1.58 * 1000). However, if the margin requirement for AMP Share CFDs is 20%, you can open an equivalent position with A$316.00 (A$1580 * 0.2). This allows you to control the full position by only putting up a fraction of its value.
As a financial services company, AMP's stock price is sensitive to internal and external drivers that can shape its business operations and determine the investor outlook. Internal risks include earnings reports; these releases often increase volatility, particularly if they surpass or underperform analysts’ expectations. External risks to consider include market-related news and the economy; AMP's Share price, for example, is significantly affected by the overall state of the global economy. Economic growth generally drives higher demand for financial services like wealth management, superannuation, and insurance.
Although several factors must be considered before opening any CFD trading position, the primary requirements to be met before taking any trade should be detailed in a Trading Plan. This plan provides a strategic selection of rules designed to allow an investor to select specific markets to trade, how to enter, exit and manage a trade, and how to control risk.
One of the advantages of trading CFDs is the ability to take both long (buy) and short (sell) positions. If a trader expects AMP's Share price to decline, they can open a short position by selling CFDs. If AMP Shares drop, the trader can buy back the CFDs at a lower price. However, if AMP's Share price rises, the stop-loss order will likely be tripped.
AMP Share CFDs can be traded on MetaTrader 5 (MT5) and cTrader. You can choose to trade on the platform that suits your trading style.
Swap Fees (Overnight Fees):
- Long positions: -8.5%
- Short positions: 2.5%
Commission Charges:
- A$5 per side
- 0.05% minimum charge per side
Note that the commission charges apply to both Standard and RAW MT5 accounts.
Two key market drivers for the AMP Stock are earnings (and expectations leading up to an earnings report) and related news flow. Volatility tends to increase when an earnings report deviates from analysts’ estimates; you will also find that the Share price responds to positive and negative forward guidance. News flow may also influence AMP’s Share price; for example, a merger deemed positive for the company can underpin the Share price. On the other hand, negative news could weigh on price action.
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