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On Thursday, Open Lending (NASDAQ:LPRO) experienced a revision in its stock rating as Jefferies analyst John Hecht downgraded the company from Buy to Hold. Accompanying this downgrade, the price target was significantly reduced to $3.70 from the previous $8.00. The stock has already declined over 51% in the past year, with a particularly sharp 16% drop just last week, according to InvestingPro data. The adjustment by Jefferies reflects concerns over operational uncertainty and broader industry headwinds that the company faces.
The rationale behind the downgrade, as stated by Hecht, centers on Open Lending’s delay in filing its 10-K report and earnings results, which is attributed to the need to finalize accounting for its profit-sharing revenue and contract assets. This delay, according to Hecht, could potentially impact the company’s profitability. InvestingPro analysis shows the company trading at a high P/E multiple of 93x, while revenue has declined by nearly 26% over the last twelve months.
Open Lending has not met revenue and adjusted EBITDA guidance for two consecutive quarters, with a noted decline in loan originations, increasing losses, and industry challenges that are impeding growth. These factors have prompted Jefferies to adopt a more cautious stance on the stock, moving to a Hold rating. Despite these challenges, InvestingPro data indicates the company maintains strong liquidity with a current ratio of 9.42, suggesting adequate resources to meet its short-term obligations.
In light of the current situation, Jefferies has also revised its earnings estimates for Open Lending for the years 2025 and 2026 to $0.09 and $0.10, respectively. The new price target of $3.70 reflects these updated expectations and the challenges that Open Lending is currently navigating.
The downgrade and revised price target are indicative of the financial institution’s reassessment of Open Lending’s near-term prospects amid its accounting issues and the unfavorable conditions within the industry. As the market absorbs this information, Open Lending’s stock performance will continue to be closely monitored by investors and analysts alike.
In other recent news, Open Lending announced a delay in releasing its fourth-quarter 2024 earnings report, initially scheduled for earlier this week. The company cited the need for additional time to complete its accounting and review processes, particularly concerning its profit share revenue and related contract assets. This development has raised concerns among investors and analysts, with BTIG maintaining a Neutral rating on the stock, highlighting skepticism about potential upward adjustments in profit share. Meanwhile, DA Davidson reaffirmed its Buy rating with an $8 price target, expressing confidence in Open Lending’s commitment to reschedule the earnings call and file the necessary financial documents by April 1st. In a positive turn, Needham upgraded Open Lending’s stock rating from Hold to Buy, setting a new price target of $7. This decision was influenced by observed stabilization and modest improvement in the auto lending market, which is expected to boost loan certification volumes as fiscal year 2025 progresses. Needham’s analysts noted reduced concerns over negative fair value revisions, previously impacted by profit share issues. These developments reflect a mixed sentiment among analysts regarding Open Lending’s financial outlook amidst ongoing uncertainty.
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