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On Tuesday, TD Cowen analysts adjusted their outlook on Nelnet (NYSE:NNI), increasing the price target to $120 from $110 while keeping a Hold rating on the shares. The revision follows Nelnet’s strong performance, highlighted by robust servicing revenue and improved net interest margin (NIM), along with lower-than-expected expenses. According to InvestingPro data, the company has demonstrated impressive momentum with an 8.13% return in the past week and maintains a strong gross profit margin of 81.33%. The company’s recent results were positively impacted, despite a $17 million writedown in its solar investments.
Nelnet’s fourth-quarter earnings per share (EPS) estimates were raised based on these results, with predictions for sustained revenue growth. The growth is anticipated to be fueled by margin improvements and a new servicing contract with SoFi (NASDAQ:SOFI). Analysts at TD Cowen project an increase in EPS estimates for the coming years, setting the figures at $6.50 for 2025, up from the previous $5.90, and $7.00 for 2026, up from $6.40. InvestingPro analysis reveals the company trades at an attractive PEG ratio of 0.22, suggesting potential value relative to its growth prospects. The platform offers 6 additional valuable insights about Nelnet’s financial health and growth potential.
Looking ahead, Nelnet is set to concentrate efforts within its Nelnet Financial Services segment, targeting consumer lending with an expected $800 million in loan deployments for the year 2025. This strategic focus is expected to contribute significantly to the company’s revenue growth.
The revised price target of $120 reflects a 16.5 times multiple of the firm’s 2025 EPS estimate. Additionally, the valuation accounts for approximately $5 in value for Nelnet’s cable and solar investments, which are currently considered a drag on the company’s EPS. Despite the positive outlook and increased price target, TD Cowen maintains a Hold rating on Nelnet stock, suggesting a neutral stance on the investment.
In other recent news, Nelnet reported fourth-quarter earnings that exceeded analyst expectations. The company posted adjusted earnings per share of $1.73, surpassing the consensus estimate of $1.25. Revenue for the quarter reached $401.61 million, significantly higher than the forecasted $335.5 million and an increase from $336.4 million in the same period last year. Growth was noted across multiple business segments, with the loan servicing and systems segment reporting revenue of $138 million, up from $128.8 million year-over-year. The education technology services and payments division also saw a rise in revenue to $108.3 million from the previous year’s $106.1 million. Nelnet’s asset generation and management segment reported loan and investment net interest income of $48.3 million, an increase from $35.6 million the previous year. Nelnet Bank’s loan and investment net interest income nearly doubled to $12.9 million. For the full year 2024, Nelnet achieved a net income of $184 million, or $5.02 per share, compared to $89.8 million, or $2.40 per share, in 2023.
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