Jefferies downgrades Hargreaves Lansdown to 'underperform'

Jefferies said two things had changed since its January update on the UK wealth names in its coverage, with Vanguard announcing it had recruited more new customers than Hargreaves Lansdown and AJ Bell's direct-to-consumer platforms combined in 2022, the latter of which also warned of a quarterly slowdown in customer growth.

"With renewed doubt about HL's ability to replace or retain departing customers," said Jefferies, which stood by its 800.0p target price on the stock.

Jefferies highlighted that Hargreaves Lansdown faces "a structural problem" of its best clients being quite old and prone to leave the platform in search of advice.

"One solution - adding lots of new young ones - has become much harder to achieve. Our valuation is unchanged, but with 14% downside from the current price and another problem facing their defensive strategy, we downgrade HL/ to 'underperform; at an unchanged PT of £8. That equates to 14x our FY23e EPS, which is where it was at the start of last week vs consensus," concluded the analysts.

Reporting by Iain Gilbert at Sharecast.com