Should you invest in Aon shares amid a downgrade from JPMorgan?

On Monday, Aon Plc (NYSE:AON) shares edged lower 1.6% after receiving a rating downgrade from JPMorgan. Analyst Jimmy Bhullar downgraded the stock to neutral from overweight, citing a potential organic growth slowdown after the recent outperformance.

AON shares have surged significantly this year, adding more than 40% to the company’s market value. As a result, the stock is substantially outperforming the S&P 500 Index, which has gained just over 16% over the same period.

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As a result, the AON stock could experience a price correction, if the predicted slowdown in organic growth comes to fruition.

Does steep valuation outweigh growth?

From an investment perspective, although JPMorgan cited a potential slowdown in organic growth, Street analysts still have a consensus earnings growth forecast of about 32.50% this year. 

Moreover, they also expect AON’s EPS to grow at an average annual rate of 14.21% over the next five years, relatively in line with the previous five.

However, the stock trades a slightly steep P/E ratio of about 31.45, making it less attractive to value investors.

AON finds trendline support

AON shares appear to be trading within an ascending channel formation in the intraday chart. However, the stock price has recently pulled back to find support off the ascending trendline. 

Therefore, investors could target potential rebound profits at approximately $294.77 or higher at $302.67. On the other hand, if the price continues to fall completing a downward channel breakout, it could find support at $277.33 or lower at $268.19.

Is AON’s momentum ending?

In summary, although AON’s earnings growth still looks exciting, the current stock price may already be factoring in the growth expectation. Moreover, the stock has gained more than 40% this year, which JPMorgan analyst Ives thinks may lead to a correction.

Therefore, it seems like AON’s current bull run may be running out of catalysts and momentum. As a result, it would be best to wait for the stock price to retest current support levels before buying.

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