Goldman Sachs downgraded financial; services company Lazard Ltd (NYSE:LAZ) to a Sell rating (From Neutral) and cut their 12-month price target on the stock to $32.00 (From $37.00) as analyst anticipate that LAZ will experience earnings challenges in the short term due to a difficult revenue trajectory and a more extended journey towards margin enhancement. Additionally, he perceives the valuation as somewhat elevated.
The expected slower revenue growth is due to a mix of factors, including hiring fewer senior bankers, ongoing challenges in the asset management sector (which makes up around 40% of LAZ's revenue), and a shift away from more promising M&A areas like small and mid-cap deals, the U.S. market, strategic transactions, energy, healthcare, and tech.
Analysts wrote in a note to investors that “Management’s recently disclosed target of doubling revenue through 2030E would require substantially enhanced AM revenue growth, advisory MD growth and MD productivity vs. the 2013-23E period, and would likely weigh on margins, given substantial guarantees for MD hires.”
In the near term, analysts believe investors might see revenue growth face challenges due to declining trends in the M&A backlog and a reduced emphasis on non-M&A investment banking activities like equity capital markets, debt capital markets, and restructuring, which have already started to pick up speed.
Goldman Sachs' revenue estimates for 2023, 2024, and 2025 are slightly lower than consensus, with projections being 1%, 4%, and 5% below the market consensus, respectively.
Shares of LAZ are down 1.83% in pre-market trading on Tuesday.