Hargreaves Lansdown downgraded to 'underperform' by RBC on valuation

8th Jun 2015 14:19

RBC Capital Markets downgraded Hargreaves Lansdown to 'underperform' from 'sector perform' but raised the target price to 1,100p from 1,050p.It said that while Hargreaves remains a high-quality, well-managed company with an impressive ability to attract net inflows, the stock is now expensive historically and versus its peer group of US-listed platforms.RBC said that based on its outlook for pricing at Hargreaves and a growth profile that lags US peers, it cannot justify the stock's current price to earnings multiple. It noted that the stock is trading at 29x expected 2016 earnings.RBC said it looks as though Hargreaves is making pricing concessions to more clients than it previously thought in order to retain them."With exchange traded funds assets under management growing in Europe and competition between platforms increasing in the UK, we believe that Hargreaves' prices are likely to trend downwards over time,"said RBC.It added that back in September 2014, management said it expected customers to pay lower fees in 5-10 years' time.