Hamilton Lane’s Adjusted EPS Boost Masks Underlying Weaknesses, Justifying Sell Rating

Analyst Alexander Blostein of Goldman Sachs maintained a Sell rating on Hamilton Lane (HLNE – Research Report), with a price target of $136.00.

Alexander Blostein’s rating is based on Hamilton Lane’s recent financial performance, which revealed several concerning factors. The company’s adjusted EPS of $1.21 was initially above expectations, but this was largely due to a change in the recognition of fee-related performance fees, which added $0.54 to the EPS. Without this adjustment, the EPS would have been significantly lower at $0.67, indicating underlying weaknesses in earnings.
Additionally, the firm’s fee-related earnings (FRE) were reported at $90 million, benefiting from the same accounting change, but when adjusted for comparability, the FRE was only $40 million, falling 28% below consensus. This shortfall was attributed to lower management fees and higher core FRE expenses, particularly compensation costs. Furthermore, the firm’s financial performance assets under management (FPAUM) were slightly below expectations, and the growth in contributions was modest. These factors combined led to a cautious outlook, justifying the Sell rating.