The Hargreaves Lansdown (HL) share price crashed by more than 10% on Monday after the company warned about volumes of its business. The HL share price ended at 1,455p, which was the lowest level since December 2020.
End of the trading boom?
Hargreaves Lansdown is one of the biggest financial services companies in the UK with a market capitalisation of more than 7 billion pounds. The company offers a platform that allows customers to buy UK and foreign shares. It also offers investment solutions like pensions services such as ISA and Annuities. Also, it offers margin trading solutions. It competes with other publicly traded companies like Plus500 and IG Group.
In a statement on Monday, the company lamented about low volumes in the second quarter. Its net new business inflows increased to 8.7 billion pounds in the first half of the year while the total assets under administration rose by 30% to 135 billion pounds. Its revenue for the first half rose to more than 631 million pounds while its profit before tax fell to 366 million pounds. The firm has more than 1.6 million customers.
These results are evidence that the company benefited from the pandemic trading boom. Now, as the economy reopens, there are concerns about whether the company will see such growth. Also, with competition rising, the company’s business could be vulnerable.
Still, early data shows that volatility is returning in the market. For example, commodity prices declined on Monday while cryptocurrencies rebounded. Such volatility is a good thing for Hargreaves Lansdown and other brokers. Also, it will likely benefit from cash hoarding among wealthy individuals. In a note, analysts at RBC said that the firm was positioned to
“capitalise on cash hoarding of wealthy households as well as the potential upside from a legacy of client interest in investments post Covid-19. It remains a quality operation.”
Hargreaves Lansdown share price forecast
The 1D chart shows that the HL share price crashed hard on Monday. This decline was relatively easy to see from a technical perspective. As shown, the stock formed a double-top pattern at 1,787p. A double-top is usually a bearish sign. Its neckline was at 1,580. A closer look also shows that the stock formed a head and shoulders pattern, which is also a bearish sign. It has also moved below the 25-day and 50-day moving averages.
Therefore, the shares will likely keep falling in the near term as investors target the support at 1,300p. However, in the longer term, the stock will likely rebound.