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On Thursday, JMP analysts reinstated coverage on Open Lending (NASDAQ:LPRO) with a Market Perform rating after a hiatus. The decision follows the company’s fourth-quarter 2024 results, which included a substantial $81.3 million reversal to previously booked profit share revenue. This reversal was notably higher than any prior adjustments. The news has contributed to the stock’s significant decline, with shares down nearly 80% year-to-date according to InvestingPro data. Concurrently, Open Lending announced significant changes in its executive team, including the CEO and COO positions, as well as the initiation of a search for a permanent CFO.
In a statement, JMP analysts noted, "We are reinstating our rating on Open Lending at Market Perform." The analysts pointed to several uncertainties hindering a more positive outlook on the stock. These uncertainties include the need for an overhaul of the company’s underwriting and pricing models, with no clear timeline for returning to historical levels of profit-share revenue per loan. InvestingPro data shows that while the company maintains strong liquidity with a current ratio of 5.84, its financial health score remains weak, reflecting these operational challenges.
Additionally, the new management team at Open Lending has not yet provided guidance on potential changes to the company’s expense structure. This lack of clarity adds to investor caution. Analysts also raised questions regarding the potential impact on the addressable market of target borrowers, especially concerning the exclusion of credit-builder and thin-file borrowers.
Finally, the analysts highlighted the auto industry’s risks associated with proposed tariffs, which could further affect Open Lending’s operations. Despite an 80% year-to-date sell-off in the company’s shares, JMP analysts concluded that these factors make it challenging to adopt a constructive stance on the stock at present. Open Lending’s Lender Protection Program, known for its unique value proposition to partners, remains a key aspect of the business, yet the current uncertainties overshadow this positive attribute. For deeper insights into Open Lending’s financial health and future prospects, including exclusive Fair Value analysis and 15+ additional ProTips, check out the comprehensive research available on InvestingPro.
In other recent news, Open Lending reported a significant earnings miss for the fourth quarter of 2024, with earnings per share (EPS) of -$1.21, falling short of the expected $0.02. Revenue was reported as a staggering negative $56.9 billion, far below the anticipated $24.02 million. The company attributed this shortfall to an $81 million reversal in previously recognized profit-sharing fee revenue, primarily due to the underperformance of loan vintages from 2021 to 2024. In response to these financial challenges, Open Lending appointed Jessica Buss as the new CEO to navigate the company through its current difficulties. Analyst firms have responded with revised price targets: Needham lowered its target to $2.00 while maintaining a Buy rating, DA Davidson cut its target to $4.00 but also retained a Buy rating, and Jefferies reduced its target to $3.00 with a Hold rating. Despite these downgrades, Open Lending’s financial position remains noteworthy, with net cash representing over 40% of its market capitalization, according to Needham. The company also reported that its certificates of insurance issuance exceeded forecasts, indicating potential stabilization in volume for the upcoming quarter. As Open Lending continues to adjust its strategies under new leadership, analysts and investors will closely monitor its progress toward achieving operational and financial targets.
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