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On Tuesday, Keefe, Bruyette & Woods maintained a Market Perform rating on HomeStreet stock (NASDAQ:HMST), with a steady price target of $12.00. The firm’s analyst highlighted the recently announced merger between HomeStreet and Mechanics Bank as a significant event, noting the deal’s potential to provide an attractive upside for HomeStreet shareholders.
The strategic merger, announced earlier today, positions HomeStreet as the legal acquirer while Mechanics Bank will be the accounting acquirer and the surviving entity. While HomeStreet hasn’t been profitable over the last twelve months, InvestingPro data indicates analysts expect the company to return to profitability this year. The analyst pointed out that based on HomeStreet’s current stock price, the company is valued at 1.24 times pro forma tangible book value (TBV) and 7.1 times the expected 2026 earnings.
The merger is seen as a positive development following the previously terminated merger between HomeStreet and FSUN. The analyst believes that Mechanics Bank’s ability to leverage its core funding strengths to manage HomeStreet’s wholesale funding could lead to potential multiple expansion as investors become more familiar with Mechanics Bank.
The analyst’s comments come after HomeStreet’s stock was trading at $9.30 as of March 28, which is in line with the 1.24 times pro forma TBV and 7.1 times the expected earnings for 2026, as mentioned in their analysis. The price target of $12.00 remains unchanged, reflecting the firm’s outlook on the stock’s performance in light of the merger news.
In other recent news, HomeStreet Inc . reported a net loss of $123.3 million, or $6.54 per share, for the fourth quarter of 2024. The company’s core net loss was $5.1 million, or $0.27 per share, which fell short of the expected earnings per share forecast of $0.23. Revenue for the quarter was $40.31 million, missing the forecasted $41.31 million. Despite an increase in net interest income by $1 million from the previous quarter and an expanded net interest margin from 1.33% to 1.38%, the financial results were negatively affected by higher costs and lower-than-expected revenue. HomeStreet has announced plans to return to profitability in the first half of 2025, focusing on repricing loans and exploring strategic alternatives. Additionally, the company completed the sale of $990 million in multifamily loans, which improved its liquidity position. Analysts from firms like KBW and Piper Sandler have been inquiring about the potential for future profitability and strategic initiatives. HomeStreet’s management remains optimistic about their ability to enhance shareholder value through these measures.
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