On Tuesday, BofA Securities adjusted its outlook on LPL Financial Holdings (NASDAQ:LPLA), reducing the price target from the previous $312.00 to $285.00 while keeping a Neutral stance on the stock. The revision reflects the firm's anticipation of decreased earnings per share (EPS) and price objective (PO) due to higher cash sorting levels and increased general and administrative (G&A) expenses, particularly in promotional spending.
The firm has revised its EPS estimates for LPL Financial downwards for the years 2024 to 2026. The new projections are set at $3.93 for the first quarter of 2024, and annual EPS of $18.64 for 2025 and $22.83 for 2026. These figures have been adjusted from the previous estimates of $3.98, $19.76, and $23.12 respectively. The adjustments are attributed to lower client cash levels and a rise in core G&A costs.
In addition to the EPS revisions, LPL Financial has announced a halt to its buyback program for the remainder of 2024. This decision comes as the company prepares for the integration of Atria throughout 2025 and addresses the challenge of managing additional leverage, which it intends to prioritize for repayment.
The price objective of $285 is derived from applying a 12.5x multiple, which remains unchanged, to the firm's 2026 EPS estimates. This valuation method reflects BofA Securities' forward-looking assessment of LPL Financial's financial performance.
InvestingPro Insights
In light of BofA Securities' revised outlook for LPL Financial Holdings, current real-time data and insights from InvestingPro provide additional context for investors. As of the last twelve months leading up to Q4 2023, LPL Financial boasts a market capitalization of $19.78 billion, with a Price/Earnings (P/E) ratio of 17.57, indicating a potentially attractive valuation when paired with near-term earnings growth.
The company's PEG ratio, which measures the P/E relative to earnings growth, stands at an appealing 0.59, further underscoring the potential for investment value.
InvestingPro Tips highlight that LPL Financial has been aggressively buying back shares, a move that often reflects management's confidence in the company's future and can be supportive of share price. Moreover, the company has been trading at a high Price/Book multiple of 9.57, which could signal a premium market valuation. Investors may find these metrics particularly relevant when considering the company's recent halt to its buyback program and BofA's adjusted price target.
For those interested in deeper analysis and more InvestingPro Tips, there are additional insights available at: https://www.investing.com/pro/LPLA. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and access to a total of 11 InvestingPro Tips for LPL Financial Holdings.
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