New Horizons at Ally: Analyst Brandon Berman from BofA Securities delivers a dose of optimism by upgrading the prognosis for Ally Financial Inc. (ALLY) from Neutral to Buy, coupled with a price target adjustment from $42 to $46.
This revamped outlook steers focus towards the recent balance sheet adjustments, projected to usher in a reassuring era of lowered earnings rollercoasters in the future.
Looking ahead, Berman envisages a scenario where net interest income estimates remain unscathed if the Federal Reserve refrains from rate cuts in FY24, with any benefits from potential rate decreases exerting a tempered influence on the net interest margin (NIM) in the same fiscal year.
With assumptions in place, the fourth quarter of FY24 is envisioned to showcase a NIM of 3.57% in light of three anticipated rate adjustments; this contrasts with the 3.4%-3.5% guidance provided.
Amid a backdrop of escalating industry-wide challenges, it’s predicted that losses for Ally Financial will reach their zenith in the second quarter of FY24, propelled by a quicker escalation relative to peers and a heightened exposure to varying credit risk profiles.
Moving forward, Berman’s foresight paints a picture of an EPS of $0.23 for the first quarter of FY24, a stark contrast to the consensus of $0.40, and anticipates a NIM of 3.13% (down by 7 basis points quarter-over-quarter) due to increased deposit costs and softer lease yields.
The numbers game continues with estimated EPS figures resonating at $2.99 for FY24 (compared to consensus estimates of $3.02), $6.18 in FY25 (contrasting to the street view of $5.30), and a projection of $6.49 in FY26 (above the $6.30 consensus mark).
For investors seeking a piece of the action, avenues to consider include the Invesco S&P Ultra Dividend Revenue ETF (RDIV) and the Nuveen ESG Mid-Cap Value ETF (NUMV).
In the realm of market movements, ALLY shares are currently charting a positive trajectory, up by 1.10% and priced at $38.99 as of Tuesday’s publication.
Also Read: Ally Financial Taps Discover Financial Services Head Michael Rhodes As Its New CEO
Photo: Courtesy Ally Financial
