Hargreaves Lansdown plc (LON:HL.) Just Reported, And Analysts Assigned A UK£16.71 Price Target

Last week, you might have seen that Hargreaves Lansdown plc (LON:HL.) released its full-year result to the market. The early response was not positive, with shares down 8.6% to UK£14.81 in the past week. Revenues of UK£631m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at UK£0.63, missing estimates by 4.3%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Hargreaves Lansdown

After the latest results, the consensus from Hargreaves Lansdown's 14 analysts is for revenues of UK£601.7m in 2022, which would reflect a small 4.6% decline in sales compared to the last year of performance. Statutory earnings per share are expected to decline 12% to UK£0.55 in the same period. Before this earnings report, the analysts had been forecasting revenues of UK£601.4m and earnings per share (EPS) of UK£0.58 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

The average price target fell 5.8% to UK£16.71, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Hargreaves Lansdown, with the most bullish analyst valuing it at UK£22.47 and the most bearish at UK£13.50 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 4.6% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 13% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.05% annually for the foreseeable future. It's pretty clear that Hargreaves Lansdown's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Hargreaves Lansdown. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Hargreaves Lansdown's revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Hargreaves Lansdown's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Hargreaves Lansdown. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Hargreaves Lansdown going out to 2024, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 2 warning signs for Hargreaves Lansdown (of which 1 is a bit unpleasant!) you should know about.

When trading Hargreaves Lansdown or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.