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On Monday, Morgan Stanley (NYSE:MS) analysts, led by Ryan Kenny, downgraded Lazard Ltd . (NYSE:LAZ) stock from an Equalweight to an Underweight rating, accompanied by a significant reduction in the price target from $56.00 to $33.00. The downgrade reflects Morgan Stanley’s diminished confidence in Lazard’s ability to achieve its financial targets amid a challenging capital markets environment. According to InvestingPro data, the stock has already fallen nearly 19% in the past week and is currently trading near its 52-week low of $33.62.
The firm’s business is divided between Advisory and Asset Management, with a 60/40 split. Analysts at Morgan Stanley have expressed concerns about Lazard’s ability to maintain a firm-wide compensation ratio of around 60% by 2025 and to achieve net flat flows in its Asset Management segment. The analysts anticipate that the compensation ratio will actually increase to 66.6% in 2025, up from 65.9% in 2024, and they warn that there is a risk it could climb even higher. Despite these challenges, InvestingPro analysis shows Lazard maintains strong fundamentals with a current ratio of 2.0 and has consistently paid dividends for 21 consecutive years.
Lazard’s management has been concentrating on controlling expenses; however, a weakening dollar is expected to exert additional upward pressure on costs, particularly because of the firm’s significant Advisory exposure to the EMEA and APAC regions. This pressure on expenses is anticipated to be more pronounced for Lazard than for its peers.
The revised $33.00 price target is based on a 10.5x price-to-earnings (P/E) ratio applied to the estimated 2026 earnings per share (EPS) of $3.11. This valuation is lower than that of Lazard’s peer group, reflecting the firm’s Asset Management business experiencing net outflows, which Morgan Stanley views as a -6% downside risk to the stock.
Lazard’s stock movement on Monday will be closely watched by investors as the market reacts to the updated assessment from Morgan Stanley. Based on InvestingPro analysis, the stock appears undervalued compared to its Fair Value estimate, with 12 additional ProTips and comprehensive financial metrics available to subscribers through the platform’s detailed Pro Research Report.
In other recent news, Lazard reported its fourth-quarter earnings for 2024, surpassing expectations with an earnings per share of $0.78, compared to the forecast of $0.63. Revenue also exceeded projections, reaching $817 million against an expected $784.45 million, highlighting the company’s robust performance in its Financial Advisory and Asset Management segments. Additionally, Lazard has been engaged by the Ontario Teachers’ Pension Plan to explore the sale of Mitratech, a legal and compliance software provider, potentially valuing the company at over $4 billion.
Lazard also announced the appointment of Peter Harrison, former CEO of Schroders (LON:SDR), to its Board of Directors, aiming to enhance its asset management division with his extensive industry experience. In a strategic move to bolster its advisory services, Lazard hired Chris Miller as a Managing Director in its Power, Energy & Infrastructure Advisory business, focusing on the Oil & Gas sector. These developments reflect Lazard’s ongoing efforts to diversify its offerings and expand its market presence.
The company’s recent initiatives underscore its commitment to growth and innovation, as it prepares to launch ETF offerings in 2025. Despite the positive earnings results, Lazard’s stock experienced a slight decline in aftermarket trading, though analysts anticipate continued strong growth in the coming year.
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