Lazard, Inc.’s LAZ shares soared 42.7% in the past year compared with the industry’s growth of 20.8%. In the same timeframe, the S&P 500 Index has rallied 22.7%. Meanwhile, LAZ peers Brookfield Asset Management Inc. BAM gained 47.7% while Burford Capital Limited BUR fell 1.9%.
Price Performance
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Does the LAZ stock have more upside left despite showing recent strength in share price? Let us try to find out.
Factors Likely to Drive LAZ Stock Higher
Favorable Policies & Revival of Deal-Making to Aid Growth: After a prolonged weakness in deal-making activities since 2022 due to geopolitical tensions and global macroeconomic concerns, deal-making activities have revived, with the pipeline looking healthy. The macroeconomic environment is steadying, driven by the global interest rate-cutting cycle and growing optimism for a strong U.S. economy. As such, M&A activities are on a path to a sustained recovery in the coming days.
Further, more lenient approach to deal-making under the Trump administration will support M&A activities in the coming days will support the growth of M&A activities. This will offer support to the LAZ’s top line in the upcoming period. Also, the diversified AUM mix in the Asset Management segment is poised to drive Lazard’s overall revenue growth.
Acquisitions to Aid AUM: Over the past years, Lazard has significantly increased its AUM balance. While the AUM balance declined in 2022 due to a challenging economic backdrop, the metric witnessed a CAGR of 1.7% over the last eight years (2016-2024).
The company’s initiatives to expand the asset management business through the acquisition of Truvvo Partners with $3.8 billion of AUM in March 2023 will continue to drive the top line in the upcoming period. Further, the company has wrapped up its initial investment in a partnership with Elaia Partners in Paris. This partnership launched an asset management service, providing private market solutions within the technology sector.
In the second quarter of 2024, the company established Lazard Elaia Capital, a strategic partnership in Europe that will launch a growth capital fund to invest in private companies within the technology industry. This move aligns with Lazard's long-term strategy to meet evolving client needs by providing private markets, alternative investments and wealth management solutions while capitalizing on opportunities in liquid public markets. Driven by these initiatives, the company’s Asset Management business is well-poised to strengthen.
Decent Liquidity Position: As of Dec. 31, 2024, Lazard held a senior debt of $1.69 billion. As of the same date, it enjoyed investment-grade credit ratings of BBB+, BBB+ and Baa3, and a stable outlook from Standard & Poor’s, Fitch, and Moody’s, respectively. This renders Lazard access to the debt markets at favorable rates.
With cash and cash equivalents of $1.31 billion at the end of the fourth quarter 2024 and $200 million of availability under its credit facility, we believe that Lazard has decent financial flexibility. Also, it has a well-laddered debt maturity profile. Hence, its investment-grade capital structure carries a lesser likelihood of defaulting interest and debt repayments if the economic situation worsens.
Ambitious 2030 Targets: The company has set a goal to double its revenues by 2030, driven by the Asset Management and Advisory segments. Further, Lazard expects to generate a total shareholder return of 10-15% per year through 2030.
2030 Targets
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Near-Term Hurdles for LAZ
Net Outflows: Lazard faces challenges with net outflows, primarily in the equity asset class. The company witnessed net outflows of $11.4 billion in 2020, $11.6 billion in 2021, $16.9 billion in 2022 and $3.5 billion in 2023. In 2024, net outflows were $35.7 billion. The company’s investment strategies in global and local markets, as well as in other emerging markets in both equities and fixed-income asset classes, are likely to support AUM growth to some extent. However, owing to the current challenging operating backdrop, any equity outflows in the emerging markets will be a hindrance in the near term.
Dependency on Financial Advisory:As of Dec. 31, 2024, Financial Advisory revenues contributed 59.9% to Lazard’s total operating revenues. The Financial Advisory segment’s revenues declined 7.1% and 17.9% year over year in 2022 and 2023, respectively, due to muted global M&A deal value and volumes, and a slump in capital market activities. Although the segment’s revenues increased in 2024, they are unlikely to reach their historical levels in the near term.
LAZ Stock Trades at a Discount
From a valuation standpoint, the company appears inexpensive relative to the industry. It is currently trading at a discount with a forward 12-month price-to-earnings (P/E) multiple of 12.29X, below the industry average of 17.02X.
Price-to-Earnings F12M
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LAZ peers BAM and BUR have current forward 12-month P/E of 32.61X and 8.41X, respectively.
How Should You Play LAZ Stock?
Solid AUM and an improvement in deal-making activity will drive Lazard’s revenue and earnings growth in the upcoming period.
Sales Estimate
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Earnings Estimate
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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
However, increased dependence on advisory revenues and continued net outflows will affect Lazard’s top-line growth in the near term. Its capital distribution activities seem unsustainable.
Thus, despite favorable valuations, the LAZ stock warrants a cautious stance at the moment. Those who own the stock can continue holding it for now, as it is likely to generate a healthy return over the long run.
LAZ 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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