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Investing.com - Raymond (NSE:RYMD) James lowered its price target on Merchants Bancorp (NASDAQ:MBIN) to $40.00 from $41.00 on Tuesday, while maintaining an Outperform rating on the stock. The $1.46 billion market cap bank currently trades at a modest P/E ratio of 5.85x, with InvestingPro analysis suggesting the stock is slightly undervalued at its current price of $31.93.
The price target reduction follows Merchants Bancorp’s second-quarter results, which showed earnings per share falling short of expectations as net charge-offs increased, leading to a larger loss provision. InvestingPro data reveals the company is quickly burning through cash, with analysts expecting net income to decline this year. Get access to 8 more exclusive InvestingPro Tips for MBIN to make better-informed investment decisions.
Raymond James noted that operating expenses were elevated due to recent hiring activity, while net interest margin contracted because of negative business shift mix impacts.
Despite these challenges, the investment firm highlighted stronger gain-on-sale fees in the second quarter, which it expects to continue at somewhat lower levels, alongside projected solid balance sheet growth and an anticipated return to historical credit strength over time.
Raymond James maintained its bullish stance on Merchants Bancorp shares, which are currently trading at a discount to peers and near tangible book value, citing strong tangible book value growth and profitability projections.
In other recent news, Merchants Bancorp reported second-quarter earnings that did not meet analyst expectations. The company posted earnings per share of $0.60, significantly below the anticipated $1.12. However, revenue for the quarter was $179.2 million, surpassing the consensus estimate of $161.1 million. Net income was $38 million, which marks a 50% decrease from the $76.4 million reported in the same quarter the previous year and a 35% decline from the first quarter of 2025. The disappointing earnings were attributed to increased provisions for credit losses related to multi-family property values and mortgage fraud investigations. Despite the earnings miss, the revenue figures were better than expected. Analysts have not provided any recent upgrades or downgrades for the company following these results. These developments are crucial for investors to consider when evaluating Merchants Bancorp’s financial health.
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