Credit Suisse Downgrades LPL Investment (LPLA) to Neutral
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Credit Suisse downgraded LPL Investment (NASDAQ: LPLA) from Outperform to Neutral and maintained a price target of $28.00, citing more balanced risk/reward.
Analyst Christian Bolu commented, ". With shares at our target price and now trading in line with the peer group (LPLA at 14x 2017 consensus EPS in line with RJF/ETFC), we downgrade shares to Neutral from Outperform. Our thesis when we upgraded the stock in February (see "Moving Past an Unforced Error; Upgrade to Outperform") was predicated on what we believed to be overblown investor concerns around leverage levels and the underappreciated inflection towards higher margin/multiple advisory businesses. We now believe leverage concerns have mostly faded given a more conservative capital management stance and continued solid free cash flow generation. With regard to business inflection, while we believe this part of our thesis still has legs to run – in 2Q advisory assets grew +5% yr/yr vs. brokerage -2% – we think it's prudent at current valuations to acknowledge some of the longer term structural risks facing the company/industry (DoL, price compression, the shift from active to passive investing)."
Shares of LPL Investment closed at $28.34 yesterday.
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