Markets
MS

Why Shares of LPL Financial Holdings Inc. Jumped Today

Shares of are surging by 14% as of 11 a.m. EST.

What: Shares of LPL Financial Holdings are surging by 14% as of 11 a.m. EST.

So what: How quickly fortunes change. After plunging more than 35% intraday on Friday due to disappointing earnings results, shares of LPL Financial are back on the list of market movers -- this time in a positive direction.

The stock appears to be responding to two analyst upgrades. An analyst at Credit Suisse upgraded the company to "outperform" from "neutral," but cut his price target to $16.50 per share, down from a previous target of $28. Previously, Credit Suisse reiterated its neutral rating on the Friday, the day of its earnings release.

Separately, an analyst from Morgan Stanley upgraded the company to "overweight" from "equal weight."

Now what: LPL Financial will undoubtedly remain one of the most volatile stocks on Wall Street. The company has used its borrowing capacity to repurchase shares, slashing its diluted share count from 108 million shares to 95.3 million since the second quarter of 2013. Though repurchases helped drive shares higher, LPL Financial is highly leveraged.

The company noted that its leverage ratio (as calculated per its debt agreements) stands at 3.8 times an adjusted measure of earnings versus its covenant requirements that hold it to no more than five times leverage. On the balance sheet, note that it is currently levered at about 5.3 times debt to equity.

High financial leverage ensures that even the smallest fluctuations in the company's enterprise value result in huge shifts in the equity value, making for a very volatile stock, indeed.

This iSecret stock could make this pop look tiny

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Why Shares of LPL Financial Holdings Inc. Jumped Today originally appeared on Fool.com.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

MS LPLA CS

Other Topics

Stocks

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More