LONDON (ShareCast) - (Sharecast News) - Hargreaves Lansdown was under pressure on Tuesday after Credit Suisse initiated coverage of the stock at 'underperform' with a 1,740p price target as it launched coverage of the European diversified financials sector.
The bank said its 2020-22 earnings per share forecast for HL are 6-13% below consensus expectations and it reckons the stock's premium valuation is difficult to support in the face of near-term headwinds.

CS said "momentum looks challenging" as HL missed its performance targets for fund flows, new clients and profit before tax in FY19. The bank estimated that underlying net fund flows slowed from £6.9bn in FY17 to £6.6bn in FY18 and £6.1bn in FY19.

"We think momentum is starting to look challenging for this 40% market share, 65% EBITDA margin, retail-facing business," it said.

"We see continued headwinds from the impact of the gating of the LF Woodford Equity Income fund (held in some HL Funds)," it added.

CS noted that HL trades at a premium to peers, reflecting its ability to gather assets under administration and grow earnings, even in difficult conditions. However, it said the valuation is vulnerable "given flow and margins, as well as potential reputation risks for this retail investor-facing company and the risk of consensus earnings downgrades".

In the same note, CS initiated coverage of Ashmore at 'underperform' with a 410p price target, while Standard Life and Schroders were started at 'neutral' with 270p and 3,250p price targets, respectively.

Jupiter Fund Management was initiated at 'underperform' with a 320p price target and London Stock Exchange was started at 'outperform' with a 8,340p target.

At 1415 BST, HL shares were down 2.9% at 2,019p.

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