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On Monday, JMP analysts maintained their Market Outperform rating and $20.00 price target for Chicago Atlantic Real Estate Finance Inc (NASDAQ:REFI) shares, which currently trades at $15.31 with an impressive 16.53% dividend yield. The firm’s stance comes after Chicago Atlantic’s fourth-quarter results were disclosed, revealing an adjusted distributable earnings per share (EPS) of $0.46, which fell short of both Citizens and consensus estimates of $0.49 and $0.48, respectively. According to InvestingPro, the company maintains robust fundamentals with a P/E ratio of 8.14.
The lower-than-expected earnings were attributed to higher management and incentive fees, which analysts believe were unusually elevated for the quarter and are expected to normalize based on the external advisor fee formula. Despite the earnings miss, JMP analysts emphasized the overall strength of the quarter for Chicago Atlantic, noting the absence of issues within its investment portfolio. InvestingPro data supports this view, showing excellent financial health with a current ratio of 21.74 and a 100% gross profit margin.
Chicago Atlantic, a real estate investment trust (REIT) specializing in cannabis capital provision, has been highlighted for its robust performance and management’s adept navigation of the complex and regulated cannabis industry. Over the past three years, the company has achieved a 34% annualized return, outpacing its public peers.
Analysts at JMP underscored the significance of Chicago Atlantic’s performance, particularly in building a reputation that could command a valuation premium compared to its peers. They also pointed out that while federal legalization of cannabis may take years, Chicago Atlantic is establishing a foundation to become the preferred choice for institutional capital once the industry achieves mainstream status. The firm’s positive outlook on Chicago Atlantic remains unchanged, with a long-term perspective on the company’s potential to create value in a burgeoning market.
In other recent news, Chicago Atlantic Real Estate Finance (REFI) reported its fourth-quarter 2024 earnings, which fell short of expectations. The company disclosed an earnings per share (EPS) of $0.39, missing the forecasted $0.50, and revenue of $14.07 million, which was below the anticipated $14.53 million. This earnings miss marks a deviation from the company’s typical performance, raising concerns among investors. Despite these challenges, the company maintains a diversified portfolio across 30 companies and strong credit metrics, which provide some stability.
The company paid total dividends of $2.06 per share in 2024, with distributable earnings per share at $0.47 for the fourth quarter and $2.08 for the full year. Chicago Atlantic Real Estate Finance plans to maintain a 90-100% dividend payout ratio in 2025. The firm also noted a strong pipeline of $490 million in the cannabis sector, with current liquidity of approximately $67 million for future deployment. Analysts from Piper Sandler highlighted concerns about the increased leverage and potential risks associated with the U.S. cannabis industry’s regulatory environment. Looking ahead, the company remains focused on cautious capital deployment and monitoring federal cannabis reforms.
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