The financial sector is CRUSHING this year! Up 30% in 2021 and 52% over the last 12 months, a combination of factors have contributed to this crazy upside. Guess what though? We think this rocketship is far from reaching its destination.
But the company with the highest upside within this sector is being widely ignored by most investors.
They just recently reported earnings as well and the numbers are off the charts.
We believe this company has the highest upside of any single stock within the financial sector.
Curious who they are? Let's dive into it.
The company? Lazard (LAZ)
Many of you may have never heard of them and that is by design. Lazard is a financial advisory and asset management firm that engages in investment banking, asset management and other financial services, primarily with institutional clients. It is actually the world's largest independent investment bank but they fly way under the radar. At a market cap of only $5B, Lazard is far from the size of the big boys like JPM, Goldman Sachs and others but their growth opportunity is massive.
Lazard's Financials:
Let us preface this section with the fact that investment bank's are often boring but great businesses. They surely make money but they're far from growth plays the way tech stocks are. However, with Lazard we're seeing growth unlike anything we originally anticipated. At ~50% QoQ (quarter over quarter) growth in M&A revenues, Lazard is rebounding strong. Yes, the stock is up 54% in the last 12 months, but we still think there's a lot more upside to come. We are projecting the stock to hit $60, thus increasing by 25% in less than a year. If that's not a high growth, low risk play, then we don't know what is!
Lazard's Stock Outlook:
So what is driving our positive outlook? A handful of factors - most recently reported during their recent earnings report:
- The first is that LAZ had an operating EPS of $1.28 vs consensus $.89. This is a 43% beat of outperformance! Seeing figures like this is extremely encouraging as LAZ is smashing expectations on their way to more growth.
- The CFO of Lazard said that they're projecting "unprecedented activity levels" in the second half of this year and beyond. When the CFO uses language like this, it wise to listen. With 55% of their revenue coming from M&A, such high activities are sure to lead to serious revenue growth.
- In their advisory business, they're seeing rapidly growing AUM's (asset under management). Representing 45% of total revenue, a pick up in their European business, is helping them rapidly scale out their advisory arm. Broadly lagging their competitors to date, this may be the push needed to make them rise to the top!
- Even with all this amazing news and high expectations, the market is still ignoring their growth potential. Trading at only 2x their 2021 Revenue, low valuation expectations make this stock a very safe value play with upside.
Wrap-up:
The biggest takeaways here is that Lazard has serious potential to outperform the financials sector in the second half of this year. Serious growth potential and low valuation, makes Lazard one of our favorite small-cap value stock plays coming into the back half of this year!
Price Target: $60
Target Date: 6-9 Months
Rating: Overweight
Ticker: LAZ