Global Presence And AI Adoption Will Expand Markets

Key Takeaways

• Record advisory revenue and strong global presence position Lazard to benefit from globalization, fueling higher future revenue and resilient, diversified growth.
  
• Expanding private capital revenues, new asset management products, and investments in technology and talent support predictable earnings, margin expansion, and reduced earnings volatility.
  
• Increased competition, industry shifts toward passive investing, rising compensation costs, and geopolitical risks all threaten Lazard's growth, profitability, and revenue stability.

Catalysts

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

• Lazard is experiencing record advisory revenue, driven by increased cross-border M&A activity, robust client engagement, and a diversified global presence-including record performance and new offices in Europe-which positions the company to benefit from accelerating globalization of capital markets and corporate activity, likely resulting in higher future revenues.
  
• Substantial growth in private capital-related revenues (now over 40% of Financial Advisory revenue) and a significant build-up in won but not yet funded asset management mandates suggest that complex global client needs in wealth and strategic financial advice are fueling strong forward pipelines, potentially driving more predictable earnings and higher AUM, and supporting margin expansion as more recurring revenue streams grow.
  
• Strategic investments in technology and generative AI, coupled with ongoing talent acquisition, are improving operational efficiency and advisory win rates, which can lower expense ratios and improve net margins over time.
  
• Lazard is successfully launching new products such as active ETFs and alternative asset strategies, alongside a record in gross inflows to asset management, which positions the firm to benefit from the growing demand for sophisticated, global, and ESG-focused investment solutions, likely boosting fee income and reducing earnings volatility.
  
• Ongoing diversification of advisory revenue (shifting to near 60% M&A, 40% non-M&A), as well as increased activity in liability management and capital solutions, expands Lazard's addressable market beyond traditional M&A cycles; this diversification both enhances revenue resilience and supports sustainable long-term growth in firm-wide earnings.

Lazard Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Lazard's revenue will grow by 10.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.9% today to 14.4% in 3 years time.
• Analysts expect earnings to reach $602.3 million (and earnings per share of $4.94) by about July 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 analysts price target, the company would need to trade at a PE ratio of 13.1x on those 2028 earnings, down from 16.5x today. This future PE is lower than the current PE for the US Capital Markets industry at 27.5x.
• 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 8.87%, as per the Simply Wall St company report.

Lazard Future Earnings Per Share Growth

Risks

• Heightened competition from both large consolidated banks and specialized boutique advisory firms could intensify fee pressures and erode Lazard's market share in M&A and advisory services over the long term, potentially impacting revenue growth and operating margins.
  
• The asset management division, while showing near-term improvements in net flows, remains susceptible to broader secular shifts toward passive investment strategies and ETFs; this could suppress AUM growth and fee income, contributing to persistent revenue stagnation and net margin compression.
  
• Ongoing reliance on talent acquisition and retention, especially at the senior banker level, may result in elevated compensation expenses and possible cost inflation-if not matched by corresponding revenue growth, this could constrain the firm's ability to achieve targeted comp ratios and sustainably grow net earnings.
  
• Geopolitical uncertainties, trade tensions, and the risk of deglobalization may negatively impact cross-border M&A and advisory activity, resulting in more volatile and uneven deal flow, which would directly affect Lazard's revenue and earnings predictability.
  
• Adoption of technology such as AI and automation, while a core focus, presents execution risks and may accelerate industry commoditization if competitors advance more quickly-potentially narrowing Lazard's competitive edge and compressing advisory and asset management fee pools, impacting long-term profitability.

Valuation

• The analysts have a consensus price target of $56.8 for Lazard based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $4.2 billion, earnings will come to $602.3 million, and it would be trading on a PE ratio of 13.1x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $52.96, the analyst price target of $56.8 is 6.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.