Source: Sharecast
Berenberg said Hargreaves Lansdown has faced 10% consensus revenue downgrades year-to-date, excluding cash revenue, and has derated by 30% to a 16.0x full-year 2023 price-to-earnings ratio.
The German bank, which also reiterated its 'hold' rating on the stock, highlighted that this represents a 40% discount to long-run average multiples.
However, Berenberg also believes there to be "limited near-term catalysts" that could materially reverse this performance, partly due to the uncertain macroeconomic and consumer confidence outlook, and the benefits of HL's back-end-loaded cost programme.
"HL earns revenue on client cash. In FY 2020 this equated to a 74bp margin and 17% of revenues. Cash margins are expected to trough in FY 2022 at 30-35bp. As Blomberg consensus expects UK rates to increase to c200bp by end-2023, total revenue should be supported by higher cash revenue, thus partly offsetting lower performance and lower activity headwinds. Consensus expects a 29bp FY 2022 cash margin, rising to 85bp in FY 2024. This implies c50-60% deposit betas," said the analysts.
"We cut our EPS by up to 20% due to lower activity and performance. We believe that, during periods of uncertainty, flows that are more tax-wrapped and less discretionary are likely to be less volatile than those that are not. As such, we prefer St. James's Place to HL."
Analysts at Liberum slashed their target price on clothing retailer Asos from 1,500.0p to 900.0p on Friday following "another profit warning" from the company.
Liberum said it was "not overly convinced" that a more cautious consumer was what has led to Asos' deteriorating performance, stating it thinks over-stocking, the wrong stock at the wrong price, the opening up of retail stores, and a competitive market were also likely to blame for recent trading.
The broker, which reiterated its 'hold' rating on the stock, said Asos' continuous decline in gross margin will reach a new low in 2022 and asked "where does it end?".
"Yes, supply chain is normalising but the constant reliance on promotions over the last 3-4 years is surely not good for what is supposed to be a brand-led story. On top of this, rising labour costs and increasing returns have limited the leverage benefits," said the analysts.
Liberum also pointed out that the "wide range" of Asos' new pre-tax profit guidance of £20.0m to £60.0m highlighted the "uncertainty" of the group's current business model.
"The company has returned to a net debt position and with significant capex plans ahead; FCF is non-existent for a few years. The current valuation at 0.3x forward sales is optically low but earnings visibility is clearly non-existent. No need to own the shares but some may feel it is too late to sell," said Liberum.
Reporting by Iain Gilbert at Sharecast.com
