After a rough Friday, shares of LPL Financial (LPLA) are having what some Wall Streeters call a “dead cat bounce.”
The shares are up about 19% on Tuesday, trading around $19.60, after dropping 35% on the last trading day before the Presidents Day weekend to end the day at $15.50.
The independent broker-dealer’s sharp fall came one day after it reported a 45% decline in profits for the fourth quarter. Also, early on Friday, Credit Suisse gave the stock a $28 price target, down from its earlier target of $44.
On Tuesday, William Blair equity analysts issued a report that sharply reduces earnings and sales estimates for the IBD this year and next.
They now believe that LPL will have earnings per share of $1.52 in 2016 and $1.89 in 2017, much more pessimistic than its earlier estimates of $2.35 for 2016 and $2.57 for 2017.
Likewise, the group has dropped its estimates for yearly sales to $3.96 billion for 2016 and $4.00 billion for 2017 vs. earlier estimates of $4.31 billion for 2016 and $4.26 billion for 2017. In 2015, LPL’s full-year sales were about $4.28 billion.
“We assume two [federal funds rate] increases in the next two years …,” wrote Christopher Shutler in a note on Tuesday. “We also assume continued declines in alternative asset sales and broader pressure on commissions (and some pickup in advisory assets as a result) as advisors increasingly shy away from more expensive products such as variable annuities.”