Canaccord Genuity upgrades Hargreaves Lansdown to 'buy'

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