LPL Financial: Earnings Power, Margin Expansion, and Recruiting Pipeline Underpin Buy Rating

Analyst Michael Cyprys from Morgan Stanley maintained a Buy rating on LPL Financial and keeping the price target at $447.00.

Michael Cyprys has given his Buy rating due to a combination of factors tied to LPL Financial’s stronger-than-anticipated operating performance and earnings power. The company delivered a notable earnings beat driven by robust revenue growth that translated into even faster expansion in adjusted EBITDA and pre-tax profits, alongside meaningful margin improvement. Management’s tighter expense control, coupled with recently implemented pricing changes that materially enhance fee revenue and margins, supports a view that LPL can sustain positive operating leverage. With the stock still trading at a relatively modest earnings multiple compared with its double-digit earnings growth profile, Cyprys sees the current valuation as not fully reflecting the company’s improved earnings outlook.
At the same time, client cash sweep balances are showing healthier momentum than the market had forecast, signaling improving trends in an important earnings driver. While net new asset growth has recently lagged expectations and remains a key area to watch, Cyprys anticipates improvement over the next year as management redirects attention and resources toward external recruiting, particularly ahead of the forthcoming Commonwealth platform conversion. The building recruiting pipeline provides further confidence that asset growth can reaccelerate. Taken together, these elements underpin his view that LPL’s earnings trajectory and growth catalysts justify a Buy rating at current levels.

In another report released yesterday, Barclays also maintained a Buy rating on the stock with a $435.00 price target.