Pershing Square Drops 12% After BofA Cuts Target to $38

The move marks the second downgrade for the stock in two days, following a cut to Sell by Citi on Friday. Bank of America lowered its earnings per share estimates for 2026, 2027, and 2028, citing a delay in the launch of the PSV fund. The bank also adjusted its long-term return assumptions and reduced the valuation multiple applied to Pershing Square to align with how it prices other asset managers in its coverage, reflecting a lower expected growth rate.

This shift in valuation methodology represents a break from the market's prior treatment of the stock. Since its IPO in April, Pershing Square had traded as a growth story, but Bank of America now values it in line with its peers. Citi made a similar argument in a note dated Oct. 9, maintaining a $45 price target while arguing that the stock's rally had outpaced its earnings outlook. Citi noted that estimates have remained broadly flat since the IPO due to modest portfolio returns and cut its 2027 EPS estimate to $0.89 from $1.01.

Underlying both downgrades are weak fund performance. The flagship Pershing Square Holdings (PSH) saw its net asset value decline 12.6% in the first half of 2026, while the S&P 500 index rose 10.2%. Lower returns result in fewer assets under management and reduced fees. Citi also revised its expectations for performance fees, projecting they will arrive later than previously anticipated.

Despite these cuts, consensus estimates still show earnings increasing through 2028, though these figures date from Oct. 9, before Bank of America's recent revisions. Citi's updated 2027 estimate of $0.89 already sits below the prior consensus of $0.96. The divergence in valuation is evident in the forward price-to-earnings multiple, which has fluctuated since the stock listed in April.

Citi values the funds Pershing Square currently manages at approximately $41 per share, adding another $9 per share for future fund launches. With the PSV launch delayed, that future value component is at risk. Bank of America's new $38 target is lower than Citi's valuation for the existing funds alone.

The consecutive downgrades suggest analysts are waiting to see new funds perform before valuing them. Until the PSV fund has a confirmed launch date and the flagship PSH fund outperforms the market again, the stock is likely to trade based on its current fund portfolio. Citi identified two potential catalysts that could change this dynamic: converting Howard Hughes Holdings into an insurance-centric entity and achieving better results from the firm's current investment portfolio.