Investment bank Lazard to get a boost from improving dealmaking outlook, KBW says

KBW upgraded Lazard (LAZ) to Outperform from Market Perform, raising its price target to $65, signaling approximately 16% upside. Analyst Alex Bond cited improving asset management inflows, with July's $4.5 billion contributing to $1.5 billion year-to-date, making Lazard's 2025 net neutral inflow goal achievable. This, combined with Lazard's enhanced productivity and headcount growth, positions the firm favorably for an anticipated rebound in M&A volumes, projected to reach 3.2% of global market cap by 2026.

Analysis

KBW has upgraded Lazard (LAZ) to an Outperform rating from Market Perform, increasing its price target to $65 and signaling approximately 16% potential upside from its prior close. The bullish revision is predicated on two primary catalysts. First, the firm's asset management division is showing significant improvement, with a $4.5 billion inflow in July bringing year-to-date inflows to a positive $1.5 billion. This momentum places Lazard's stated 2025 goal of achieving net neutral inflows well within reach, further supported by a substantial $10 billion-plus pipeline of won-but-not-funded mandates. Second, Lazard is positioned to capitalize on a projected recovery in the M&A cycle, bolstered by recent enhancements in productivity and headcount growth. KBW forecasts industry M&A volumes, as a percentage of global market cap, to rise from 2.5% in 2024 to 3.2% by 2026. This anticipated rebound, while significant, remains well below the 10-year average of 4.8%, suggesting a durable and potentially extended recovery runway for the advisory business.

Key Decisions for Investors

• Given the dual catalysts of a turnaround in asset management flows and an anticipated recovery in the M&A cycle, investors may view the 16% potential upside to the new $65 price target as a compelling rationale to initiate or add to positions.
• It is critical to monitor Lazard's subsequent quarterly reports for continued positive net asset inflows and to track broader M&A volume data to confirm the cycle recovery is materializing as forecasted.
• Investors should consider that the projected M&A recovery to 3.2% of global market cap by 2026 remains significantly below the 10-year average of 4.8%, which could imply a multi-year growth runway for the firm if the cycle normalizes further.