Citigroup upgrades Hargreaves Lansdown after recent drop

15th Oct 2014 09:47

Citigroup has raised its recommendation for financial services group Hargreaves Lansdown from 'sell' to 'neutral', saying that while concerns remain the stock's poor performance so far this year has gone far enough.The target price for the shares has been slashed from 980p to 830p, but the bank has taken a more positive stance, explaining that the 43% drop from the stock's peak in January is "enough to reflect the risks".While Citi has cut its own earnings per share (EPS) forecasts for Hargreaves on lower new business volumes, market return assumptions and Vantage stockbroking volume growth/revenues, the end of the downgrade cycle "could be in sight".The bank said: "HL's cash management initiatives should stabilise cash yield this year, even offering the potential for higher yields [for year ending June 2016] without bank base rate rises. Management has also indicated it can flex costs if revenue trends disappoint."Nevertheless, it warned investors that removing its 'sell' rating too early is a risk given the absence of good news in Tuesday's first-quarter trading update."EPS downgrades may not, in fact, be over, or even if they are - [valuation] de-rating could continue," Citi said.The stock was up 1.1% at 881.5p by 10:13.