Shares in Hargreaves Lansdown (LON:HL) dropped sharply on Thursday after a downgrade by investment group Liberum.
The group cited industry headwinds as a reason for the downgrade, including a possible further cut in the base rate.
Liberum’s Justin Bates commented: “There is no doubting the formidable track record and strength of the Hargreaves Lansdown business model. However, trading on a PE of 36x, with the prospect of consensus downgrades and significant industry headwinds, Liberum view the risk/reward as unfavourable.
“The possibility of further cuts to base rates, increased regulatory capital requirements, margin pressure and the FCA’s review of the industry add up to a challenging outlook.”
Alongside the sell note, Liberum revised their EPS forecasts to 4 percent below consensus in FY17, 10 percent in FY18 and 13 percent in FY19.
The downgrade comes a just over a week after strong preliminary full year results. Net revenue rose 11 percent to £326.5 million, with profit up 10 percent to £218.9 million.
CEO Ian Gorham commented on the results: “We are delighted to present a set of results demonstrating a healthy profit growth and continued substantial new assets and clients. Hargreaves Lansdown is well positioned to take advantage of the structural opportunity for growth in the savings and investments market, including the launch of the Lifetime ISA in April next year.”
Gorham also took the opportunity to announce his intention to step down from the position of Chief Executive after six years in the role. He is expected to be replaced by Chris Hill, the group’s chief financial officer, next October.
“The board’s preference is to promote from within if at all possible and a clear requisite is a proven individual who can demonstrate a keen understanding of the culture and values of the firm,” Hargreaves Lansdown said in the statement.
Hargreaves Lansdown shares were down 3.17 percent to 1,276 at 1010GMT.