Globalization And Technology Will Expand International Advisory Opportunities

Key Takeaways

• Expansion in senior talent, private capital focus, and geographic diversification is driving new client wins and shifting revenues toward more resilient, higher-fee streams.
  
• Technology integration and asset management transformation are enhancing productivity, supporting structurally higher fees, and positioning Lazard for long-term margin and earnings growth.
  
• Growing automation, cyclical revenue swings, geopolitical risks, fee pressure, and tech underinvestment threaten Lazard's competitive position, margins, and long-term earnings potential.

Catalysts

Operates as a financial advisory and asset management firm in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• While analyst consensus expects increased headcount and expansion to strain margins near-term, Lazard's acceleration in hiring high-quality senior bankers and its 2030 plan to expand advisory talent is already resulting in new client wins and mandates, suggesting operating leverage will drive advisory revenue growth and margin expansion ahead of expectations.
  
• Analysts broadly agree that growing private capital connectivity and related investments may take time to pay off, yet Lazard's record first-half fundraising business and more than 40% of advisory revenue now tied to private capital signals a faster-than-anticipated shift to higher fee, recurring revenues and a more resilient earnings base.
  
• Lazard's proactive geographic and product diversification, including its strong and growing footprint in Europe and emerging markets, is positioning the company to capture outsized revenue growth from accelerating globalization and cross-border deal flow as global M&A rebounds.
  
• The transformation underway in Lazard's Asset Management business-reflected in record gross inflows, positive net flows, a robust pipeline of unfunded mandates, and a mix shift away from low-fee subadvisory towards higher-fee, international and emerging markets strategies-will support structurally higher management fee revenue and improved margins.
  
• Early adoption and integration of advanced technology and generative AI is already boosting productivity firm-wide and will likely drive substantial efficiency gains across both advisory and asset management, improving net margins and setting the stage for long-term earnings outperformance.

Lazard Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Lazard compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Lazard's revenue will grow by 13.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 9.9% today to 15.3% in 3 years time.
• The bullish analysts expect earnings to reach $677.3 million (and earnings per share of $5.57) by about August 2028, up from $302.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.6x on those 2028 earnings, down from 16.0x today. This future PE is lower than the current PE for the US Capital Markets industry at 26.3x.
• Analysts expect the number of shares outstanding to grow by 4.64% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.47%, as per the Simply Wall St company report.

Lazard Future Earnings Per Share Growth

Risks

• Increasing automation and AI-driven decision-making in corporate finance may reduce demand for Lazard's traditional Financial Advisory services, threatening future revenue growth as clients seek more technology-enabled, lower-cost solutions.
  
• Revenue volatility remains a persistent risk due to Lazard's dependence on the inherently cyclical M&A and restructuring advisory business, exposing the company to potential periods of sharp revenue and earnings declines during macroeconomic slowdowns or subdued deal environments.
  
• Heightened geopolitical instability and rising protectionism could stifle cross-border deal flow, a significant historical driver of Lazard's advisory revenues, leading to lower deal volume and negatively impacting both top-line revenue and margins.
  
• Intensifying competition and ongoing fee compression-driven by clients' price sensitivity and the rise of boutiques, bulge-bracket banks, and new entrants-are likely to exert downward pressure on Lazard's profit margins and overall earnings power in the long term.
  
• Relative underinvestment in technology compared to larger, integrated peers may erode Lazard's competitive position, resulting in higher non-compensation expenses to catch up, lower client retention, and margin compression as clients shift toward firms offering more advanced, tech-enabled services.

Valuation

• The assumed bullish price target for Lazard is $65.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Lazard's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $65.0, and the most bearish reporting a price target of just $47.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $4.4 billion, earnings will come to $677.3 million, and it would be trading on a PE ratio of 13.6x, assuming you use a discount rate of 9.5%.
  
• Given the current share price of $51.28, the bullish analyst price target of $65.0 is 21.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.