Analysts at Berenberg lowered their target price on investment bank Hargreaves Lansdown from 2,000.0p to 1,850.0p on Wednesday following the group’s full-year earnings report earlier in the week.
Berenberg stated Hargreaves Lansdown’s share price remained roughly 10% lower than it was before its full-year results on Monday, given larger-than-expected cost growth, weaker-than-expected net new business and continued client demographic changes.
Although the German bank said higher costs were “unhelpful”, it believes that consensus adequately captured the likely client activity slowdown stemming from Covid-19 lockdowns and that HL’s client base, which was 17% bigger year-on-year, can drive “meaningful value creation”.
“HL is attractive, in our view, trading on 24.5x our FY23 P/E, a circa 15% discount to its long-run average, with a 7% underlying FY20-24 EPS CAGR,” said the analysts.
Berenberg also highlighted that retention was “critical”, stating that many investors appear worried that brokerage activity will fall beyond consensus expectations.
“In our view, as long as client retention rates remain high, this concern is well hedged, assuming a progressively less active client within brokerage switches assets into funds,” said Berenberg, which thinks retention will remain “solid”.
