Evercore ISI sets OneMain stock with $58 price target

On Tuesday, Evercore ISI began coverage on OneMain Holdings Inc. (NYSE: NYSE:OMF), a prominent figure in the non-prime consumer lending industry, with an ’In Line’ rating and a price target set at $58. OneMain, with approximately 1,300 branches and a robust digital platform, holds a significant 20% share of the $110 billion non-prime personal loan market. The company has been diversifying its portfolio, expanding into credit card and auto lending sectors. According to InvestingPro data, OneMain maintains a strong financial health score of GOOD, with particularly robust cash flow metrics. The stock has shown impressive momentum, delivering a 9.37% return in the past week alone.

OneMain has been on a trajectory of improvement, experiencing accelerated growth in managed receivables and a favorable inflection in net charge-offs (NCOs) after several years of heightened losses due to post-pandemic economic and borrower volatility. While Evercore ISI cautions that the path forward for OneMain is fraught with risks, especially considering the economic stress sensitivity of its lower-income customer base, InvestingPro analysis reveals the company maintains strong fundamentals with a current ratio of 337.11, indicating excellent liquidity. The company’s gross profit margin stands at an impressive 92.43%, demonstrating operational efficiency despite market challenges.

The firm notes potential downside to the consensus adjusted commercial and industrial (C&I) earnings per share (EPS) estimates, citing a slower-than-anticipated pace of credit improvement and persistent macroeconomic pressures. Additionally, there are concerns over the projected cost of funds, which could impact net interest income (NII). Despite these risks, OneMain trades at 7.1 times Evercore ISI’s 2026 C&I EPS estimate, aligning with its peers. The near-term price-to-earnings (P/E) ratio also remains close to its historical discount when compared to peers, at approximately 0.77 times.

OneMain has been added to the Evercore ISI Tactical Underperform List, reflecting the potential for recalibration of Street estimates to exert pressure on the stock in the near term. Nevertheless, Evercore ISI anticipates that OneMain’s solid profitability, favorable long-term growth prospects, and impressive management team will sustain the stock’s valuation over time.

The firm acknowledges that a reset in earnings expectations and increased confidence in the lower-end consumer backdrop could eventually lead to a more favorable view of OneMain’s stock in the upcoming months.

In other recent news, OneMain Holdings Inc. reported its fourth-quarter 2024 earnings, narrowly missing analysts’ expectations with an earnings per share (EPS) of $1.16, compared to the forecasted $1.17. Revenue also fell short, reaching $1.17 billion against the anticipated $1.18 billion. Despite these misses, OneMain Holdings demonstrated solid growth in certain areas, with a 9% increase in total revenue for the full year 2024 and managed receivables growth of 11%, reaching $2.47 billion. Additionally, the company issued $600 million in senior notes due 2032, which are part of its broader strategy to manage its debt portfolio.

JMP Securities recently maintained a positive stance on OneMain Holdings, reiterating its Market Outperform rating and a price target of $65.00, citing the company’s improving credit situation. The firm noted that management is optimistic about potentially relaxing lending restrictions later in the year if positive economic trends continue. In leadership news, OneMain Financial announced the appointment of Andrew D. Macdonald to its Board of Directors, bringing his extensive experience in legal technology solutions to the company. These developments reflect OneMain’s ongoing efforts to strengthen its leadership and financial strategies.

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