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On Friday, Goldman Sachs reaffirmed its Buy rating and $405.00 price target for LPL Financial Holdings (NASDAQ:LPLA), following the company’s fourth-quarter earnings report. LPL Financial reported earnings per share (EPS) of $4.25, which was 8% higher than the $3.94 consensus estimate. The company’s adjusted EBITDA of $585 million also exceeded consensus expectations by 2%, driven by increased commissions, advisory fees, and cash sweep revenues. According to InvestingPro data, LPL Financial maintains a "GREAT" financial health score of 3.11 out of 5, with particularly strong marks in profitability and price momentum.
LPL Financial’s cash balances showed significant growth, ending the quarter at $55.1 billion, an 8% increase over consensus expectations and a 20% rise quarter over quarter. Excluding recent acquisitions, the increase was 11%, still outpacing the average growth of broker peers, which saw an average increase of 9% in core cash balances. InvestingPro analysis reveals the company maintains a healthy current ratio of 2.24, indicating strong liquidity with assets well exceeding short-term obligations.
The firm’s total client assets stood at $1.7 trillion at the quarter’s end, marking a 9% increase from the previous quarter and over 29% year over year. This growth was attributed to strong market performance, industry-leading net new assets (NNA), and recent acquisitions. LPL Financial also posted a 17% annualized organic growth rate for the fourth quarter, or 7% excluding the impact of acquisitions, which was significantly higher than the 5% average for its peers. With a market capitalization of $27.09 billion and an impressive one-year return of 52%, the company has demonstrated remarkable growth momentum.
Looking ahead to the first quarter of 2025, LPL Financial’s management anticipates an increase in recruiting momentum following a seasonally slower period. The onboarding of clients from acquisitions such as PRU and Wintrust is expected to contribute to mid-double-digit annualized organic growth during the quarter.
Goldman Sachs has adjusted its 2025, 2026, and 2027 EPS estimates for LPL Financial to $20.16, $24.94, and $29.87, respectively, up from previous estimates. These adjustments reflect the company’s higher cash balances and an improved forward curve, as well as better operating leverage in the coming years.
Despite the stock’s recent performance, Goldman Sachs remains optimistic about LPL Financial’s prospects. The firm projects that the company’s EPS growth will accelerate significantly, with an estimated compound annual growth rate (CAGR) of over 20% through 2027. This growth is expected to be supported by a resumption in cash revenue growth, solid NNA, increased monetization opportunities, and a focus on managing expenses. Goldman Sachs finds LPL Financial’s price-to-earnings (P/E) ratio of 14.5 times its updated 2026 EPS estimates to be an attractive investment opportunity, especially in the context of the broader expansion of financials’ multiples over the past 12 to 18 months. InvestingPro analysis indicates the stock is currently trading at Fair Value, with 10 additional ProTips and comprehensive metrics available in the Pro Research Report, offering deeper insights into LPL Financial’s valuation and growth potential.
In other recent news, LPL Financial has been the subject of several significant developments. Notably, Citi has raised its stock target for LPL Financial to $415 while maintaining a Buy rating, reflecting confidence in the company’s growth prospects. This comes as LPL Financial’s recruiting trends have been robust, indicating strong momentum as the company enters 2025. In addition to Citi’s positive outlook, JMP Securities reiterated a Market Outperform rating for LPL Financial with a price target of $435, and JPMorgan upgraded the company’s stock rating, raising its target to $397 and revising its 2026 earnings estimates upwards by approximately 10%.
On the regulatory front, LPL Financial agreed to pay an $18 million civil penalty to the Securities and Exchange Commission (SEC) due to issues with its anti-money laundering program. Furthermore, LPL Financial and Wells Fargo (NYSE:WFC) each agreed to pay a $900,000 penalty to the SEC for providing incomplete and inaccurate securities trading data.
In terms of strategic moves, LPL Financial settled with its former CEO, Dan H. Arnold, allowing him to retain stock options valued at approximately $12 million. The company also replaced its existing Term Loan B with a new Term Loan A, a move expected to save the company around $4 million annually in cash interest expenses. Lastly, LPL Financial has been actively expanding its workforce and asset base, acquiring Atria Wealth Solutions and planning to onboard the wealth management businesses of Prudential (LON:PRU) Financial (NYSE:PRU) and Wintrust Financial (NASDAQ:WTFC) by early 2025.
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