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Monday, Advanced Flower Capital (NASDAQ:AFCG) retains its Market Perform rating by Citizens JMP following the company’s fourth-quarter earnings report for 2024. The stock, which has declined over 20% in the past week and currently trades at $6.62, faces continued pressure despite maintaining a strong current ratio of 3.59. The firm’s analyst, Aaron Hecht, chose to maintain the existing rating after AFCG disclosed distributable earnings that fell short of both the consensus and Citizens’ own forecasts.
Advanced Flower Capital reported distributable earnings of $0.29 per share, which did not meet the anticipated $0.35 and $0.37 per share projected by consensus and Citizens JMP, respectively. The lower-than-expected earnings were primarily due to reduced interest income, which is believed to be connected to the company’s loans that are currently in default. Despite these challenges, InvestingPro data shows the company maintains a significant 13.9% dividend yield, although dividend growth has declined by 31.25% over the last twelve months.
The current state of non-performing loans is concerning, with three loans totaling $144 million in principal, accounting for 36.3% of AFCG’s investment balance. Although there is an expectation that the company will recover some of these funds through legal action, the specifics regarding the amount and timing remain unclear.
The impact of these defaults is significant, with implications for the company’s future earnings potential and dividend payouts. However, Hecht suggests that the market has already accounted for this news in AFCG’s stock price, leading to the decision to uphold the Market Perform rating and signaling that the stock is viewed as fairly valued at the current levels.
Investors are keeping a close eye on Advanced Flower Capital as it navigates the challenges posed by the defaulted loans. The company’s ability to recover the defaulted funds and the timeline for such recoveries remain critical factors that will influence AFCG’s financial health and stock performance moving forward. According to InvestingPro analysis, AFCG appears undervalued at current levels, with analysts maintaining price targets ranging from $7 to $13. For deeper insights into AFCG’s valuation and 8 additional ProTips, including detailed financial health metrics, subscribers can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Advanced Flower Capital reported disappointing fourth-quarter 2024 earnings, with earnings per share (EPS) of $0.29, missing the forecast of $0.3683. Revenue also fell short, reaching only $7.64 million against an anticipated $11.59 million. Jefferies analyst Matthew Hurwit downgraded the company’s stock from Buy to Hold, citing concerns over credit uncertainty, particularly with 39% of AFCG’s loans in non-accrual status. This financial strain has also led to a 30% reduction in the company’s dividend, now at $0.23 per share. Advanced Flower Capital has a strong pipeline of over $380 million in potential deals, focusing on lending to established cannabis operators. The company ended 2024 with total assets of $402.1 million and cash and cash equivalents of $103.6 million. Analysts are closely watching the company’s ability to manage underperforming credits and stabilize its loan portfolio amidst a challenging market environment.
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