Raymond James upgrades LPL Financial stock rating to Market Perform

Investing.com - Raymond James upgraded LPL Financial Holdings (NASDAQ:LPLA) from Underperform to Market Perform, citing the stock’s valuation trading at approximately 14.1x 2026 EPS, roughly in line with its three-year average of 14.4x. Currently trading at $325.13, with a P/E ratio of 22.22x, InvestingPro analysis suggests the stock is slightly undervalued, with analyst price targets ranging from $365 to $504.

The research firm noted that while LPLA’s earnings remain sensitive to short-term interest rates, they believe the federal funds target rate would need to fall "materially below 3% in 2026" to significantly pressure the company’s intermediate-term earnings. Current bond market projections suggest approximately two additional 25 basis point cuts in 2025 and another two to three similar cuts in 2026. With strong financial metrics and an overall "GOOD" health score from InvestingPro, the company appears well-positioned to navigate rate changes.

Raymond James highlighted that the Commonwealth acquisition is expected to boost earnings and help diversify away from client cash income, though the firm expressed concerns about LPLA achieving its targeted 90% retention rate. The company projects the Commonwealth deal to be "low single-digit accretive by 2027." This comes as LPLA demonstrates strong revenue growth of 28.54% over the last twelve months.

The firm pointed out that organic net new asset growth could be "relatively more modest" while LPLA focuses on Commonwealth retention. August’s annualized organic net new asset growth was 3.9%, below the company’s typical high single-digit to low double-digit rates.

Raymond James also observed that CEO Rich Steinmeier, who assumed the role in October 2024, appears more focused on controlling general and administrative expenses than his predecessor, with core G&A now guided to grow approximately 25% at the midpoint after the Commonwealth transaction for full-year 2025 year-over-year.

In other recent news, LPL Financial Holdings reported a significant increase in its advisory and brokerage assets, reaching $2.26 trillion by the end of August 2025. This 16.7% rise was largely due to the acquisition of Commonwealth Financial Network, which added $275 billion in net new assets. Excluding this acquisition, LPL Financial achieved $17.8 billion in organic net new assets, reflecting an 11% annualized growth rate. In other developments, LPL Financial and Prudential Financial announced an expanded partnership to introduce an Insurance Overlay retirement lifetime income strategy, targeting financial advisors who typically do not use protected lifetime income solutions.

Analyst activity also highlighted LPL Financial’s recent trajectory. Citizens raised its price target for LPL Financial to $455, maintaining a Market Outperform rating, despite noting the complexities of the current quarter due to the Commonwealth acquisition. Meanwhile, BMO Capital initiated coverage with an Outperform rating and a $365 price target, citing the company’s growth potential amidst rising competition in wealth management. However, Rothschild Redburn downgraded LPL Financial from Buy to Neutral, lowering the price target to $390, as the firm navigates the integration of CFN over the next 12-18 months. These developments reflect a dynamic period for LPL Financial, with significant asset growth and varied analyst perspectives.

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