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On Tuesday, JPMorgan analysts revised their stance on Guild Holdings Co . (NYSE:GHLD), upgrading the company's stock rating from Underweight to Neutral. Accompanying this change, they have set a new price target of $12.00, adjusted from the prior target of $12.50. The stock, which has seen an 8.93% decline over the past week, currently trades near its InvestingPro Fair Value, with analyst targets ranging from $12.50 to $19.00.
The upgrade reflects JPMorgan's anticipation of possible monetary policy adjustments by the Federal Reserve in response to the current tariff plan implemented by the Trump administration. According to the analysts, such tariffs could prompt the Fed to lower interest rates. If this scenario unfolds, it could trigger a surge in refinancing activities, benefiting Guild Holdings, which has demonstrated strong financial health with a current ratio of 2.29 and impressive revenue growth of 60.7% over the last twelve months. For deeper insights into Guild Holdings' financial metrics and growth potential, InvestingPro subscribers can access comprehensive analysis and additional ProTips.
JPMorgan analysts further explained that an increase in mortgage demand driven by rate cuts could lead to wider gain on sale margins for the company. This potential outcome is seen as a positive development for Guild Holdings, which specializes in mortgage lending and related services.
However, caution remains part of JPMorgan's outlook due to the ongoing uncertainty surrounding tariff policies. The analysts acknowledge that while there are potential benefits, there is still a downside risk that cannot be ignored, as the situation with tariffs and their impact on the economy is still evolving.
In their commentary, the JPMorgan analysts stated, "If the Trump administration's tariff plan remains in effect, it may force the Fed to cut rates, which could usher in a wave of refinancing activity. We would also expect gain on sale margins to expand as mortgage demand increases." They also noted the downside risks, adding, "We still see downside risk given uncertainty around tariff policy." These insights provide the rationale behind the adjusted rating and price target for Guild Holdings Co.
In other recent news, Guild Holdings reported its fourth-quarter 2024 earnings, with revenue reaching $373 million, significantly surpassing the forecast of $297.3 million. Despite this revenue beat, the company's earnings per share (EPS) came in at $0.32, falling short of the anticipated $0.34. Guild Holdings demonstrated strong financial performance over the year, with total originations increasing by 57% to $24 billion and net revenue growing by 60% to $1 billion. The company's net income attributable to Guild reached $97.1 million, a notable improvement from the previous year's net loss of $39 million. Analysts from Jefferies and JPMorgan inquired about the company's strategies and market conditions during the earnings call, highlighting ongoing interest in Guild's operational strategies. Guild Holdings continues to focus on expanding its servicing portfolio and enhancing its technology infrastructure, with plans to invest in its platform development. The company maintains a strategic focus on purchase originations, representing 88% of its closed loan volume, outperforming industry averages. Looking ahead, Guild Holdings remains optimistic about its growth strategy despite challenges from high interest rates.
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