Deutsche Bank downgrades Hargreaves Lansdown to 'Sell'
Hargreaves Lansdown reported net new business of £1.7bn in the period, up 6% on the previous quarter.
The bank noted that Hargreaves Lansdown's share price has increased by about 20% over the last two weeks to 927p. In the same time period, the FTSE 100 has risen just 6%.
Rhea Shah, analyst at Deutsche Bank, said in a note yesterday (24 July) that «we view [this] as an overreaction to the recent inflation data and fourth quarter trading update».
«At these levels, we feel cautious on the medium-term outlook for the group, and see more downside than upside,» she added.
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In its trading update for the three months to June 2023 last week, Hargreaves Lansdown reported net new business of £1.7bn in the period, up 6% on the previous quarter, as well as closing assets under administration of £134bn, up 2% in the quarter.
Both Hargreaves's trading update and the UK's inflation reading came in better than market expectations. However, Deutsche Bank argued that the investment platform was set to face some headwinds.
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These are namely that UK investor sentiment will take a while to recover which in turn could keep flows muted in the short-term, and that earnings could remain relatively flat over the medium-term, «worrying for a company in a high-growth sub-sector».
«As such, combining our cautious stance with our new target price of 790p, we see enough downside to downgrade our rating to a sell,» Shah said.
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