Raymond James Financial, Inc.

▲ Bull Case

• ◆Commonwealth recruiting tailwind: LPL's $2.7B acquisition of Commonwealth disrupted ~2,700 advisors, and RJF is the primary beneficiary — same culture, similar model, already yielding near-$700M in recruited production with zero acquisition premium, representing a multi-year organic growth vein.
• ◆Capital Markets at the floor: Management's $380M quarterly CM 'floor' is a signal, not a ceiling. Recovery to $450–480M+ provides ~$0.55 adj. EPS uplift per $100M quarterly CM revenue increase, with prior cycle peaks above $500M indicating meaningful upside as M&A/ECM cycles normalize.
• ◆NII headwind manageable: PCG organic growth of ~$750M/year more than offsets even a 100bps rate cut headwind of $200–250M. The $2.7B/year NII run-rate provides a large cushion, and a soft-landing Fed scenario could keep the headwind well below consensus fears.

▼ Bear Case

• ◆Fed cuts 200bps scenario: A 200bps rate cut cycle could create a $400–500M NII headwind — a meaningful blow to earnings when combined with any equity market softness, potentially driving adj. EPS toward $9.50–10.00 for FY2026 and threatening the perception of earnings reliability.
• ◆Capital Markets stays at floor: If M&A/ECM activity remains suppressed by tariff uncertainty or macro weakness, CM could stay at or below $380M for 2+ years, capping EPS growth and removing a key re-rating catalyst from the thesis.
• ◆Valuation is fair, not cheap: At 13.4x FY2026E, RJF is only modestly discounted. It lacks the asymmetric upside of LPLA (+63% PWFV) or the deep value of LAZ (+58% PWFV), limiting the risk-adjusted return profile for investors seeking higher financial services alpha.

“The central debate is whether the NII headwind is manageable or destructive. Bulls argue PCG organic growth of ~$750M/year more than offsets even a 100bps cut headwind, and the business grows through rate cycles. Bears argue 200bps of cuts combined with a potential equity market correction could produce a rare EPS decline. The secondary debate is whether $380M in quarterly CM revenue is a floor or a new normal — bulls see M&A recovery as secular and achievable by FY2027, while bears cite tariff sensitivity and structural middle-market M&A compression. Resolution depends on Q2 FY2026 (April 2026) NII and CM disclosures.”

• ◆Q2 FY2026 CM revenue above $450M, confirming recovery from the $380M floor and triggering upward EPS revisions of 10–15%
• ◆Advisor count surpassing 9,100 by FY2026 year-end, validating the Commonwealth recruiting vein and raising the PCG fee revenue floor
• ◆Fed holds rates or cuts less than feared, keeping NII headwind below $100M vs. consensus $200–250M and enabling adj. EPS beats
• ◆Shoukry's first full FY2026 execution matching or beating guidance, establishing CEO credibility and supporting multiple re-rating toward 15–16x

• ◆Fed cuts 200bps creating a $400–500M NII headwind; adj. EPS revised below $10 for FY2026; probability 25%, severity HIGH
• ◆Equity market correction of -20% driving AUA below $1.4T and a $200M+ fee revenue headwind; probability 20%, severity MODERATE
• ◆Capital Markets revenue stays at or below $380M floor for 2+ years due to tariff-driven M&A suppression; probability 20%, severity MODERATE
• ◆Bank credit losses from RJB NPL ratio rising above 2% in a recession scenario; probability 10%, severity MODERATE
• ◆Net advisor attrition spike rendering Commonwealth recruiting insufficient to offset organic departures; probability 10%, severity MODERATE