LPL Financial upgraded to Buy at Goldman as negatives become positives

|About: LPL Financial Holdings Inc. (LPLA)|By:, SA News Editor

LPL Financial Holdings (LPLA +1.8%) is higher after Goldman Sachs upgrades shares to Buy from Neutral with a $47 price target, saying the headwinds LPLA faced last year - debt covenant constraints, low interest rates, and asset-based fee pressure - have become tailwinds.

“Additionally, while the company trades relatively in line with peers, given debt covenant issues have now passed and we expect buybacks to resume, we believe investors will again ascribe value to LPLA’s less capital intensive model," the firm writes.

Using the low end of LPLA’s 3.25x-3.5x leverage target, Goldman sees the company as having $555M of “excess cash” by year-end 2017; the firm does not expect all the cash to be deployed, but believes it underscores improving capital flexibility and provides upside to its 2017 buyback estimate of $120M.