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Investing.com - DA Davidson downgraded First Foundation (NYSE:FFWM) from Buy to Neutral and lowered its price target to $6.00 from $8.50 on Friday. The new target represents about 13% upside from the current trading price of $5.30, though InvestingPro data shows the company has not been profitable over the last twelve months.
The downgrade follows First Foundation’s announcement earlier this week that it would be sold to FSUN, a development that DA Davidson characterized as surprising primarily for its timing rather than the eventual outcome.
First Foundation’s third-quarter results were negatively impacted by a substantial 90 basis point increase to the allowance for credit losses (ACL), which came after the company conducted a review and update of its Current Expected Credit Loss (CECL) methodology. This comes amid challenging financial conditions, with the company reporting a basic EPS of -$1.24 and a steep revenue decline of nearly 55% year-over-year.
DA Davidson noted that First Foundation shares are no longer trading based on fundamentals, but should instead remain relatively aligned with FSUN’s price movements due to the fixed exchange ratio of 0.16083 established in the acquisition agreement. According to InvestingPro analysis, First Foundation appears slightly overvalued at current prices, with its Financial Health Score rated as "WEAK."
The firm’s revised $6.00 price target reflects the new market dynamics following the acquisition announcement, as the stock’s performance will now be primarily influenced by the pending transaction rather than standalone company performance. Despite current challenges, analysts predict First Foundation will return to profitability this year, trading at just 0.47 times book value. For deeper insights and additional ProTips on FFWM, check out the comprehensive Pro Research Report available on InvestingPro.
In other recent news, First Foundation Inc . reported a net loss for the second quarter of 2025, missing analyst expectations. The company’s adjusted core after-tax net income was $1 million, or $0.01 per share, compared to the expected earnings per share of $0.02. Revenue also fell short of projections, marking a challenging quarter for the company. In a significant development, FirstSun Capital Bancorp and First Foundation announced a merger agreement valued at approximately $785 million, forming a $17 billion regional bank. First Foundation stockholders will receive shares of FirstSun common stock, while warrant holders will receive additional cash consideration. Additionally, First Foundation has made several key executive appointments. Parham Medhat has been named Executive Vice President and Chief Operations Officer, Dean R. Glassberg has been appointed Executive Vice President and Chief Credit Officer, and Stuart Bernstein has taken on the role of Executive Vice President and Chief Banking Officer. These appointments are part of First Foundation’s strategic efforts to strengthen its leadership team.
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