Canaccord Genuity upgrades Hargreaves Lansdown to 'buy'

Analysts at Canaccord Genuity upgraded financial services firm Hargreaves Lansdown from 'hold' to 'buy' on Tuesday, stating an "almost" perfect storm had created a "buying opportunity".

Canaccord Genuity said that since announcing "a major investment project" at its Capital Markets Day on 22 February, Hargreaves Lansdown's shares were down 43%.

"Investor surprise at the scale of the £175.0m, five-year project, coupled with a wider market sell-off, have seen the shares trading at their lowest level since January 2013," said the analysts.

Canaccord does not believe that some targets set at the CMD will be achieved - namely an increase in net new business to high-single digits, net new business hitting £20.0bn in 2026 and HL's client base growing to roughly 2.6m by 2026.

However, the Canadian bank said return on equity was still "very high" at more than 40%, and, given the high retention rate of clients and assets, the shares should offer "attractive compounding characteristics" over the medium-to-long term.

"In summary, HL faces challenges, but we believe the stock has been oversold and now offers an opportunity for investors to build a stake in a strategically important, high quality, high return, highly cash generative business."

Canaccord also lowered its target price on the stock from 1,695.0p to 1,148.0p.

Reporting by Iain Gilbert at Sharecast.com