Houlihan Lokey (HLI) Stock Forecast & Price Target

Houlihan Lokey Inc. has demonstrated a positive outlook due to an increase in corporate finance revenues, which reached $421.6 million, significantly surpassing both internal and consensus estimates driven by larger transaction sizes and higher fees. The firm has reported a robust 45% year-over-year increase in transactions, supported by favorable conditions in M&A and capital markets, suggesting strong market dynamics and increasing deal activity. Additionally, Houlihan Lokey’s sustained backlog in restructuring, alongside improvement in new business generation, positions the company favorably within the competitive landscape, especially as it continues to cater to its core clientele in the lower middle market.

The analysis highlights a negative outlook for Houlihan Lokey due to potential recession risks that could lead to a significant decline in M&A volumes and capital market activity, which are critical to its Corporate Finance segment. Although the company reported restructuring revenues of $130.9 million, this figure was below internal estimates and only slightly above consensus expectations, indicating a lack of strong growth in this area. Furthermore, the firm's middle market-focused business model introduces additional uncertainty regarding future revenue visibility, compounding concerns about its financial resilience amid adverse market conditions.