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Investing.com - BMO Capital has lowered its price target on Jefferies Group (NYSE:JEF) to $55.00 from $69.00 while maintaining a Market Perform rating. The stock, currently trading at $48.80 with a market capitalization of $10.07 billion, has experienced significant pressure this year with a -36.5% year-to-date return. According to InvestingPro analysis, the stock’s RSI suggests it is in oversold territory.
The firm cited several factors from Jefferies’ recent Investor Day Q&A session, noting that while the presentation contained limited new information, the question-and-answer portion provided valuable insights. BMO Capital indicated that business momentum at Jefferies does not appear to be impacted by recent stock weakness.
According to BMO Capital, Jefferies management described the current quarter as "great" and stated they have not seen clients or counterparties pulling back despite investor concerns about potential headline risks. The firm also highlighted that Jefferies plans to slow its recruiting efforts, which could lead to compensation leverage.
BMO Capital noted that Jefferies has been less active in share repurchases recently due to dialogue with SMBC, but management indicated the stock was cheap, suggesting buybacks may resume. The investment bank’s comments implied that buybacks now look compelling at current price levels.
The new $55 price target represents 11 times BMO Capital’s 2027 earnings estimates for Jefferies, with the firm expecting non-compensation leverage and revenue growth to drive improvement, while compensation leverage will likely be a smaller contributor. InvestingPro analysis suggests the stock is trading below its Fair Value, with additional insights and valuation metrics available to subscribers. Get access to 8 more exclusive ProTips and comprehensive financial analysis tools to make more informed investment decisions.
In other recent news, Jefferies Financial Group has been in the spotlight due to several developments. The company disclosed that the bankruptcy filing by First Brands Group could potentially impact its investment portfolios, particularly a $715 million portfolio managed by its division, Point Bonita Capital. Despite these concerns, Morgan Stanley has maintained its Equalweight rating on Jefferies, citing that the company’s exposure to First Brands’ receivables is approximately $45 million, which they consider manageable. Meanwhile, BMO Capital has initiated coverage on Jefferies with a Market Perform rating, highlighting promising long-term positioning but noting near-term challenges.
In a related development, the U.S. Department of Justice has launched an investigation into First Brands Group’s bankruptcy, focusing on potential losses for investors and creditors. On a different note, Oportun has secured a $247 million revolving warehouse facility and extended another facility with Goldman Sachs and Jefferies, both at more favorable terms, reducing its financing costs. These recent developments underscore the dynamic financial landscape surrounding Jefferies and related entities.
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