LPL Financial Holdings Inc. LPLA shares touched a new all-time high of $344.86 during Monday’s trading session. Over the past year, the stock has risen 41.7%, outperforming the industry, the Zacks Finance sector and the S&P 500 index. Also, LPLA stock has performed better than its peers — The Charles Schwab Corporation SCHW and Tradeweb Markets Inc. TW.

One-Year Price Performance

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Does LPLA stock have more upside left despite hitting an all-time high? Let’s try to find out.

Factors Likely to Drive LPL Financial’s Stock Higher

Favorable Policies & Rate Cuts to Aid Revenues: In November 2024, Donald Trump won the U.S. Presidential elections and is set to begin his term on Jan. 20, 2025. A favorable stance toward businesses is likely to gain investor confidence, thus increasing market participation and liquidity.

This will boost the company’s revenues across the mix and client engagement. Moreover, anticipated corporate tax cuts will likely enhance profitability.

Additionally, the Federal Reserve has started lowering interest rates (100 basis points or bps cut implemented since September 2024). This, along with future rate cuts, will support LPL Financial’s advisory and brokerage assets, and transaction-based revenues. Also, higher profitability for the firms in general will lead to higher valuations, thus boosting equity markets further and aiding transaction-based revenues.

The company’s recruiting efforts, strategic acquisitions and solid advisor productivity are expected to keep supporting revenues. LPL Financial’s total revenues witnessed a compound annual growth rate (CAGR) of 14.1% over the last five years (2018-2023), with the uptrend continuing in the first nine months of 2024.

Revenue Growth Trend

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The Zacks Consensus Estimate for sales implies growth of 19.2% and 17.8% for 2024 and 2025, respectively.

Strategic Acquisitions: LPL Financial remains engaged in pursuing opportunistic acquisitions to aid its revenue growth and expand its footprint globally. In October 2024, the company acquired Atria Wealth Solutions to bolster its offerings in the wealth management solutions market, while in May, it acquired the wealth management business of Crown Capital.

Further, in September 2024, LPLA agreed to acquire The Investment Center, Inc., a broker-dealer and registered investment advisor. In 2023, the company bought a minority stake in IAA (a hybrid registered investment advisory firm) and acquired FRGIS and the Private Client Group business of Boenning & Scattergood.

A strong balance sheet enables LPLA to pursue strategic buyouts to expand its presence, diversify its revenues and enhance new capabilities.

Solid Balance Sheet Position: As of Sept. 30, 2024, LPL Financial’s net corporate debt and other borrowings were $4.44 billion, while cash and cash equivalents (including cash segregated under federal or other regulations) were $2.86 billion.

Given a solid balance sheet position, the company’s capital distribution activities remain encouraging. In February 2023, LPLA hiked its quarterly dividend by 20 to 30 cents per share.

The company has hiked its dividend once in the last five years with an annualized dividend growth rate of 5.4%.

Dividend Yield

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Similarly, SCHW has increased its dividends four times over the past five years, while TW has hiked its dividends twice over the same time frame.
 
Moreover, LPL Financial has a share repurchase plan in place as well, which it halted till the acquisition of Altria Wealth Solutions. As of Sept. 30, 2024, roughly $830 million worth of authorization remained available. Management planned to resume buybacks in the fourth quarter of 2024, with about $100 million worth of shares to be repurchased.

Hence, a solid liquidity profile and robust balance sheet enable the company to address its near-term debt obligations and sustain its capital distributions.

Bullish Analyst Sentiments on LPLA Stock: Over the past month, the Zacks Consensus Estimate for 2024 earnings of $16.07 has moved marginally downward, while the same for 2025 earnings of $18.75 per share moved marginally upward.

Estimate Revision Trend

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The projected figures imply a rise of 2.2% and 16.7% for 2024 and 2025, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Near-Term Hurdles for LPL Financial Stock

Huge Dependence on Commission-Based Revenues: Despite the abovementioned factors that will likely support LPLA stock, excessive reliance on commission-based revenues (constituting 26.4% of total revenues in the first nine months of 2024) is a woe. The company’s commission revenues increased in 2021, declined in 2022 and then increased in 2023 and in the first nine months of 2024. As revenues depend on the capital markets performance, which is cyclical in nature, these revenues are likely to remain volatile if a market slowdown occurs.

Rising Expense Base: The persistent rise in expenses is another concern. The company’s operating expenses witnessed a CAGR of 14% over the last five years (2018-2023), with the uptrend persisting in the first nine months of 2024. The expenses are likely to stay elevated going forward on account of rising headcount, strategic buyouts and technological investments.

Expense Growth Trend

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Parting Thoughts on LPL Financial

Interest rate cuts, strategic buyouts, a pro-business stance of the Trump-led administration and a solid balance sheet are likely to support LPLA’s financials. However, rising expenses and significant reliance on commission-based revenues are concerns.

Thus, LPLA stock warrants a cautious stance at the moment. Those who own the stock can continue holding it for now.

LPLA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report

Tradeweb Markets Inc. (TW) : Free Stock Analysis Report

LPL Financial Holdings Inc. (LPLA) : Free Stock Analysis Report

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