LPLA stock is the IBD Stock Of The Day, clearing a buy point as the investment advisor eyes robust growth, with more Americans turning to professionals for investment advice.
LPL Financial boasts a network of nearly 20,000 financial advisors nationwide. It added an impressive 2,589 advisors in 2021, including 900 from its Waddell & Reed acquisition.
In 2021, LPL's assets swelled to a record $1.2 trillion, jumping 34% year over year. The company benefited from a soaring stock market and better recruiting. It also gained from its Waddell & Reed Wealth Management purchase.
Amid the pandemic and stimulus surge in savings for many Americans, a 2021 Harris Poll survey found 26% of Americans said their most trusted source for financial advice is a financial advisor. That was up from 22% a year earlier. In 2020, 30% of respondents said their most trusted source for financial advice was themselves. That number dropped to 20% in 2021.
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LPLA Stock Technical Analysis
Shares of LPL Financial rose more than 3% on the stock market today. LPLA stock topped a 191.08 buy point from a cup-with-handle base that stretched back to Feb. 10.
LPL Financial sits comfortably above the 21-day exponential moving average while the major indexes are attempting to retake that level after volatility fueled by the Russia-Ukraine war, inflation and rate hikes.
The relative strength line for LPLA stock made a new high as the financial stock broke out, according to MarketSmith. That's a bullish sign and indicated by a blue circle at the end of the RS line. That strength indicator shows a strong uptrend in the longer term. A rising RS line means that a stock is outperforming the S&P 500.
The San Diego-based broker-dealer belongs to the Finance-Investment Banks and Brokers group.
The 31 stocks in this group include Charles Schwab and Raymond James. Among them, LPL Financial is No. 1 in terms of its IBD Composite Rating — 94 out of 99. The Comp Rating combines key fundamental and technical metrics in a single easy-to-use score.
An IBD Relative Strength Rating of 92 means that LPL Financial has outperformed 92% of all stocks in IBD's database over the past year.
However, the industry group lags with a No. 127 ranking out of 197 groups tracked by IBD.
LPL Financial Earnings And Fundamental Analysis
The broker dealer bears a strong EPS Rating of 87 out of 99.
In the fourth quarter of 2021, LPL Financial posted robust asset growth in the brokerage and advisory channels. Total advisory and brokerage assets rose 34% year over year to $1.21 trillion. Net new assets increased $26 billion in Q4 and $119 billion for the full year, thanks in large part to the Waddell & Reed buy.
"Our long-term vision is to become the leader across the entire advisor-centered marketplace, which for us means being the best at empowering advisors to deliver great advice to their clients," LPL CEO Dan Arnold said on a Feb. 4 earnings call.
For all of 2021, LPL Financial earnings per share rebounded 9% after diving 10% in 2020. Revenue jumped 32% in both Q4 and all of 2021.
Analysts on Wall Street expect EPS to jump 35% in 2022 as revenue grows 18%. LPL Financial earnings are seen vaulting a further 50% in 2023 as revenue rises 16%. The San Diego, Calif.-based company reports its first-quarter results on April 28.
LPL stock holds an SMR Rating of A, on a scale of A to a worst E. The SMR Rating is a combined measure of sales growth, profit margins and return on equity.
More than 700 funds held LPLA stock as of March. The stock has zero quarters of rising fund ownership, according to the IBD Stock Checkup tool.
LPL Revenues And Fed Rate hikes
Financials, including LPLA stock, generally get a boost from rising interest rates.
The Federal Reserve's federal funds rate was near zero throughout 2021. But on March 16, the Fed hiked its key interest rate for the first time since 2018 and signaled six more increases to come this year.
The rate hikes should mean higher LPL revenues.
"Our revenue is exposed to interest rate risk primarily from changes in fees payable to us from banks participating in our client cash programs, which are generally based on prevailing interest rates," the company's 2021 Annual report says.
In the past, LPL's revenue from its client cash programs fell because of low interest rates.
LPLA Stock: Recruiting Pays Off
Recruiting continues to pay off for LPL as it closes in on 20,000 advisors.
In 2021, recruited assets more than doubled to $89 billion.
"We will crest that very soon," Rich Steinmeier, an LPL executive, told Barron's. "I don't know that there's a cap. I don't. It's not 20,000. It's not going to be 30,000. There's not a cap."
