Jefferies sets Flagstar Bank stock Buy rating, $15 target

Tuesday, Flagstar Bank (NYSE:FLG), a $5.2 billion market cap financial institution, received a vote of confidence from Jefferies as the firm initiated coverage with a Buy rating and a price target of $15.00. According to InvestingPro data, this target represents potential upside from the current trading price of $12.49. The endorsement is based on the expectation that Flagstar Bank’s credit quality will continue to improve, following a comprehensive portfolio review conducted in 2024. The analyst at Jefferies highlighted the bank’s proactive measures to cut operating costs and strengthen its capital position.

Flagstar Bank’s efforts to navigate through a challenging period have been noted, with the bank focusing on operational efficiency and financial stability. While InvestingPro analysis indicates a WEAK Financial Health Score of 1.49, the bank has shown impressive momentum with a year-to-date return of 33.88%. Jefferies’ analyst pointed out that these strategic moves are setting the stage for a more robust financial future, making the current stock valuation an attractive opportunity for investors.

Despite a contraction in the bank’s two-year compound annual growth rate (CAGR) through the first quarter of 2025, with loans and deposits shrinking by 8.3% and 9.1% respectively, Jefferies remains optimistic. InvestingPro data reveals several key insights about the company’s current position, including anticipated sales decline and profitability challenges this year. Subscribers can access 6 additional ProTips and comprehensive financial metrics in the Pro Research Report. This performance stands in contrast to a mid-cap peer group average growth of 2.8% for loans and 2.3% for deposits. However, the firm believes that the negative trend is turning around, and Flagstar Bank is on a path to recovery.

The analyst’s commentary underscores a belief in the bank’s potential: "Our BUY rating reflects our view that credit quality should continue to improve over time, following the comprehensive portfolio review in 2024. We are also impressed with the company’s efforts to reduce operating costs and rebuild capital. With trends moving in the right direction, we view this as a good entry point for investors, especially given the company’s discounted valuation."

The positive outlook for Flagstar Bank by Jefferies comes at a time when investors are closely monitoring financial institutions for signs of stability and growth potential. With analyst price targets ranging from $12.50 to $15.50, and the stock showing strong momentum over the past month, the bank’s stock price may respond to this new coverage as the market digests the insights and expectations set forth by the firm.

In other recent news, Flagstar Bank reported its Q1 2025 earnings, revealing a narrower-than-expected loss with an adjusted net loss of $0.23 per share, surpassing analysts’ expectations of a $0.28 loss. Revenue for the quarter was $490 million, which fell short of the $510.44 million forecast. Despite the revenue miss, the company’s strategic efforts to reduce non-interest expenses by $71 million quarter-over-quarter signaled operational efficiency. Additionally, DA Davidson reiterated its Buy rating for Flagstar Bank, maintaining a price target of $14.50, emphasizing confidence in the bank’s strategic direction and potential return to profitability by the fourth quarter of 2025. Citi also affirmed its Buy rating, raising the price target to $15.50, reflecting a positive outlook on the bank’s recent legal actions aimed at addressing loan repayment issues. Flagstar’s recent legal motion for a court-ordered receiver against Pinnacle Group involves 90 loans originally valued at over $600 million, representing 18% of the bank’s total nonperforming loans. These developments, combined with adjustments to expense projections and anticipated reductions in future loan loss provision expenses, have contributed to a more optimistic financial forecast for the bank.

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