Ally Financial Faces Financial Challenges: TD Cowen Lowers Price Target and EPS Estimates Amid Credit Concerns
In a recent update, TD Cowen maintained a Hold rating on Ally Financial (NYSE: NYSE:) but lowered the price target from $45.00 to $37.00 due to concerns over deteriorating credit conditions and shrinking margins impacting the company's performance. The firm revised its earnings per share (EPS) estimates for 2024 to $2.55 and for 2025 to $3.85, reflecting a decrease from previous estimates.
The financial challenges borrowers are facing in the current economic climate have led to higher delinquencies and net charge-offs at Ally Financial, along with a reduction in net interest income. Additionally, the upcoming 50 basis point rate cut is expected to put further pressure on the company's margins in the fourth quarter of 2024.
Despite these challenges, TD Cowen has reiterated its Hold rating on the stock, with a new price target of $37.00 based on a 10x multiple of the firm's 2025 EPS estimate. This revised target reflects a cautious outlook on the company's near-term financial prospects.
Ally Financial has recently reported a 15% increase in revenue and an adjusted EPS of $0.97 in its Q2 2024 earnings report. However, increased credit challenges in the automotive retail sector have led to rising delinquencies and net charge-offs, prompting the company to sell its lending business to Synchrony Financial.
Analysts have expressed mixed opinions on Ally Financial's stock, with BTIG downgrading it from Buy to Neutral, BofA Securities revising its price target to $37.00, Goldman Sachs maintaining a Buy rating, and Citi retaining a Buy rating due to an attractive entry point for investors.
In a nutshell, Ally Financial is facing financial challenges amidst a tough operating environment, with credit concerns impacting its performance. Investors should carefully consider these factors and analyze the company's real-time metrics before making any investment decisions to ensure the best possible outcome for their finances.