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On Friday, Jefferies analyst Matthew Hurwit issued a downgrade for Advanced Flower Capital (NASDAQ: AFCG), adjusting the stock rating from Buy to Hold. Accompanying the downgrade, the price target was reduced to $7.00 from $10.00. The decision reflects concerns over credit uncertainty, as highlighted by the significant portion of the company’s loans in non-accrual status. According to InvestingPro data, the stock has fallen nearly 20% in the past week, now trading at $6.76, close to its 52-week low of $6.51.
Hurwit pointed out that approximately 39% of AFCG’s loans were on non-accrual at the end of the fourth quarter of 2024, casting doubt on the potential recovery of these loans and the timing of such recoveries. This financial uncertainty has led to a direct impact on the company’s dividend, which saw a quarter-over-quarter reduction of 30%, now at $0.23. Despite the reduction, InvestingPro data shows AFCG still maintains a substantial 19.53% dividend yield, though the company’s dividend growth has declined by 31.25% over the last twelve months.
The analyst further noted that AFCG shares are currently trading at roughly 0.8 times the net asset value (NAV), aligning with the long-term average for the stock. The revised price target of $7 is based on this NAV multiple, which remains consistent with historical trends.
Advanced Flower Capital’s recent financial adjustments and the subsequent downgrade by Jefferies underscore the challenges faced by the firm in the current credit environment. The company’s stock performance and future outlook are now closely tied to its ability to navigate these uncertainties and stabilize its loan portfolio.
In other recent news, Advanced Flower Capital Inc. reported its fourth-quarter 2024 earnings, which fell short of Wall Street expectations. The company reported earnings per share of $0.29, missing the forecasted $0.3683. Revenue also underperformed, reaching $7.64 million compared to the anticipated $11.59 million. Despite these setbacks, Advanced Flower Capital highlighted a robust pipeline of over $380 million in potential deals, focusing on lending to established cannabis operators. Analysts have noted these developments as the company continues to navigate a challenging market environment.
In terms of financial strategy, the company has set its first-quarter 2025 dividend at $0.23 per share, maintaining a focus on sustainable returns. Advanced Flower Capital’s CEO, Daniel Neville, emphasized the company’s strategic positioning and commitment to achieving attractive risk-adjusted returns. The company also reported total assets of $402.1 million and cash and cash equivalents of $103.6 million as of December 31, 2024. Looking forward, Advanced Flower Capital aims to continue diversifying its portfolio and focusing on quality credits in emerging markets.
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