Compass Point analysts Chris Allen and Michael Anagnostakis initiated coverage on Stifel Financial Corp. with a "buy" rating and a price target of $65.
The analysts have a positive outlook on Stifel's global wealth management segment, which comprises 65% of revenues, and they note that the company has been upbeat in hiring financial advisers. The increase in recruitment will drive client asset growth and increased productivity per adviser, the analysts said.
Allen and Anagnostakis said the growth from the adviser recruitment could result in good organic growth potential and create opportunities to acquire smaller players that are struggling with technology and regulatory requirements.
The analysts have a mixed outlook on Stifel's banking unit given the current economic and interest rate environment, but they forecast that its net interest margin will benefit from the bank's shift to higher-yielding loans and as the company builds deposit generation capabilities. They also maintained a positive outlook on the company's investment banking business and its healthy pipeline.
The analysts also praised the company's flexible deployment of capital, given their view that the company prefers to use it to drive growth through either organic or M&A channels, but management might be more aggressive in returning capital to shareholders in the face of a more challenging environment.