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On Wednesday, DA Davidson analyst Gary P. Tenner adjusted the price target for Western Alliance Bancorporation (NYSE:WAL) shares, bringing it down to $90 from the previous $106, while continuing to recommend the stock as a Buy. According to InvestingPro data, the stock currently trades at a P/E ratio of 9.49x with a market capitalization of $7.53 billion, suggesting potential value despite recent market challenges. Tenner’s action followed a day when Western Alliance’s shares did not perform as well as expected due to the company’s quarterly earnings report released on April 22, which showed earnings per share (EPS) in line with projections but a lower than anticipated pre-provision net revenue (PPNR) per share.
The analyst noted that the main concern for investors was the higher level of criticized loans, which seemed to weigh on the stock’s performance. Despite this, DA Davidson does not foresee Western Alliance significantly increasing its current allowance for credit losses (ACL), which stands at 0.77%. The company’s management believes the current level of ACL is adequate, considering the mix and performance of its portfolio.
Furthermore, Tenner highlighted that while management did not release reserves, it did choose to apply a more adverse scenario from Moody’s analytics for its office portfolio, leading to an addition to its reserves. This move by Western Alliance indicates a cautious approach in response to potential risks in the office real estate segment of its loan portfolio.
The price target reduction reflects the analyst’s reaction to the recent earnings report and the challenges Western Alliance faces with its criticized loans. Despite the lower price target, the Buy rating suggests that DA Davidson still sees potential in Western Alliance Bancorporation’s stock, albeit with tempered expectations due to the current financial headwinds.
In other recent news, Western Alliance Bancorporation reported its Q1 2025 earnings, meeting analyst expectations for earnings per share (EPS) at $1.79 but falling short on revenue with $778 million, below the projected $791.05 million. The bank saw a 12% year-over-year increase in pre-provision net revenue, though the revenue miss highlighted potential challenges in its revenue-generating operations. Analysts at Keefe, Bruyette & Woods adjusted the price target for Western Alliance, lowering it to $95 from $110, while maintaining an Outperform rating. This adjustment reflects an analysis of the company’s projected financial performance and market conditions.
Western Alliance’s net interest income rose by 9% to $651 million, supported by a stable net interest margin of 3.47%. The bank maintains a positive outlook for 2025, anticipating loan growth of $5 billion and deposit growth of $8 billion, with expected increases in net interest and non-interest income. Analysts noted that the bank’s strong capital position, with a Common Equity Tier 1 (CET1) ratio over 11%, provides a solid foundation despite the current macroeconomic volatility. Western Alliance continues to focus on diversified business lines and digital platforms, with guidance indicating stability and potential growth in the coming quarters.
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