3i Group Shares Are Up 61% in a Year – Is It Set For A Pull Back?

3i Group (LON: III) shares have been on a tremendous run, rising more than 61% over the last 12 months and over 125% since the start of 2023.

That rise has been boosted by the performance of Action, its single largest asset, which has grown significantly.

However, analysts at Morgan Stanley believe the share price rise may be about to top out, with the US investment bank downgrading 3i to Equal Weight from Overweight, lowering the price target to 3,192p from 3,246p in a note on Wednesday.

They noted 3i's significant appeal based on the robust compounding characteristics at Action, but given the strong share price rally since 2023, Morgan Stanley said it is now lowering its rating for the stock.

The bank's analysts said 3i's valuation is near the historical high of about 1.4x P/NAV based on its March 2024 NAV. Following 3i's AGM statement, Morgan Stanley lowered its NAV forecasts for the company by approximately 2% for FY25 to FY27.

Even so, the bank acknowledged that gearing to capital market recovery and re-acceleration at Action is key to potential further upside for the stock.

In June, Deutsche Bank initiated coverage of 3i Group with a Hold rating and 2,647p price target, telling investors they believe growth in near-term portfolio values will be driven primarily by EBITDA growth at Action.