Buckingham: Raymond James Has 41% Upside

• The share price of Raymond James Financial, Inc. RJF has declined 19.3 percent in the past three months.
• Buckingham’s James Mitchell has reiterated a Buy rating and price target of $70 on the company.
• Following the company’s August operating data being released, Mitchell believes that the stock has 41 percent upside.

Analyst James Mitchell reported that the company’s total fees and commissions grew 8 percent year-on-year, in August, in-line with the estimates, driven to a large extent by private client growth.

On the other hand, while August proved to be a “robust month: for M&A fees, the company reported a “modest” quarter-on-quarter increase in i-banking revenue. Raymond James mentioned, however, that i-banking revenues for the quarter were tracking significantly below the level witnessed during the same quarter in 2014.

Mitchell believes that there could be risk to the i-banking fees estimate, specifically in underwriting fees, “although mostly offset by lower comp assumptions.”

Net loans growth 2 percent month-on-month and were tracking higher than the FY4Q15 estimates by 3 percent in August. Mitchell expects this growth to continue, with potential upside to the FY1Q16 estimate.

Raymond James has bought back 1.1 million shares since August 24, 2015. According to Mitchell, this implies “1) RJF sees the stock as undervalued after the recent sell-off; and 2) mgmt. is taking an incrementally more active stance toward capital mgmt.”

Mitchell believes that the buyback could boost investor sentiment and prove to be a catalyst for the stock.