Are LPL shares heading to $300?

After LPL Financial Holdings Inc. said Tuesday that it was buying broker-dealer network Atria Wealth Solutions Inc. for a base price of $805 million, the company's shares popped.

The market, and some securities analysts who follow LPL Financial, apparently liked the news of the latest acquisition by LPL, which has done dozens of deals in its history.

The price of the firm's shares (LPLA) hit a 52-week high of $263.34 Tuesday before retreating and closing for the day at $257.80.

But the earnings potential that Atria's 2,400 financial advisors and $100 billion in assets could eventually bring to LPL, once they move in 2025, sharply struck one analyst, who raised his share price for LPL Financial above $300 per share.

That would be an undeniable milestone for a company that had its initial public offering in 2010 on the Nasdaq at a price of $30.

LPL Financial executives have a history of not commenting publicly on the company's share price. But they must have been heartened privately when Steven Chubak, managing director at Wolfe Research, wrote in a note Tuesday afternoon that his price target for LPLA shares increased to $306 from $295, or an upside of 20% based on the day's trading, after including Atria's financial contributions.

Chubak focused in particular on the low percentage – about 20% – of Atria advisors' client assets in advisory accounts, which charge annual fees, with the remainder in accounts that charge commissions. The broad financial advice industry has been moving to charging more clients fees over the past two decades because such fees represent steady annual revenue and income for the firm.

"Atria has a relatively low advice penetration, which LPLA expects to accelerate towards its current advice mix," Chubak wrote in the note, entitled LPLA - the Path to $300+ Just Got A Whole Lot Easier. "Second, Atria's Enterprise business was one of the few formidable competitors to LPLA; we believe the addition of Atria will transform LPLA from a leading player in the space into a category killer."

Adding in cost savings from consolidating Atria's various broker-dealers, the potential for earnings to accrete should "overwhelm" any decline in the share price caused by LPL's plans to pause its share buyback program, Chubak noted.

LPL said that the Atria acquisition had an estimated run-rate EBITDA – or earnings before interest, taxes, depreciation and amortization – accretion of about $140 million when "fully ramped."

There are plenty of questions about the deal given that so many financial advisors are involved, industry observers and executives noted.

Will Atria management deliver and move over more than 80% of its financial advisors, thus gaining a portion of the additional $200 million offered as an incentive? Will LPL look favorably at all of Atria's financial advisors, based on their work histories?

Moreover, it isn’t easy to get financial advisors to shift their business model from charging clients sales commissions to annual fees. Many of these brokers and financial advisors are older, stuck in their ways, and sell mutual fund A shares from institutions like American Funds. They probably don't want to change around their books of business, industry sources said.

"This is like a completely fresh broker-dealer search for these 2,400 advisors," said Jodie Papike, president of recruiting firm Cross-Search. "They're looking at LPL as the custodian and back office, and asking, 'Is this a good fit for me?' There will be some fallout."

Meanwhile, LPL executives spent Tuesday speaking with Atria's advisors and will have any offers of retention bonuses to those advisors in the next couple of weeks, industry sources said.

"We are reaching out to understand their business needs and reaffirm our commitment to supporting them, their businesses and their clients," Scott Posner, LPL's executive vice president of business development, said in an email Wednesday afternoon. "As part of this outreach, we are communicating about the overall experience and advisor economics, demonstrating that LPL is a great home for their businesses."