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On Friday, Oppenheimer analysts downgraded Palmer Square Capital BDC (NYSE:PSBD) stock rating from Outperform to Perform. In a significant adjustment, the firm also reduced the price target to $3.00 from the previous $14.00. The stock currently trades at $12.06, with a market capitalization of approximately $394 million. According to InvestingPro data, two analysts have recently revised their earnings expectations downward for the upcoming period. The downgrade followed Palmer Square’s first-quarter performance, where the company reported a loss of $0.26 per share, resulting in a return on equity (ROE) of -6.4%. The net losses amounted to $21.3 million or $0.65 per share, which were primarily attributed to spread widening.
The analysts at Oppenheimer provided forecasts for Palmer Square, estimating earnings of $0.89 per share for the full year of 2025 and $1.45 per share for 2026. These projections correspond to expected ROEs of 5.4% and 9.1%, respectively. Despite the poor performance in the first quarter, the firm anticipates that Palmer Square’s net investment income (NII) will likely cover the declared dividend of $1.44 per share for both years. InvestingPro data shows the company maintains a significant dividend yield of 13.1%, making it an interesting option for income-focused investors. Get access to comprehensive dividend analysis and 6 additional ProTips with an InvestingPro subscription.
The rationale behind the downgrade and price target reduction involves an increase in the equity discount rate by 100 basis points, reflecting the volatility of Palmer Square’s ROE and a rise in credit losses. The analysts recalculated the fair value of Palmer Square shares, considering a 9% ROE and an estimated cost of equity capital of 10%. This led to a fair value estimate of $14 per share, which is 0.9 times the book value.
As a result of these recalculations and estimations, Oppenheimer has decided to lower the price target for Palmer Square to $3.00 per share. The new rating of Perform, down from Outperform, reflects the firm’s revised outlook on Palmer Square’s financial prospects and market performance. The stock has experienced significant pressure recently, trading near its 52-week low of $11.51, with a -19% return over the past six months. Discover more detailed analysis and insights with a InvestingPro subscription, including access to the comprehensive Pro Research Report covering what really matters for PSBD’s investment outlook.
In other recent news, Palmer Square Capital BDC Inc. reported its net asset value (NAV) per share as $15.85 as of March 31, 2025. This figure was disclosed in a filing with the Securities and Exchange Commission, providing investors with a snapshot of the company’s financial health. Previously, the company had announced an estimated NAV of $16.70 per share as of January 31, 2025. These updates serve as key performance metrics for the business development company, reflecting the value of its underlying investments minus liabilities. Investors closely monitor changes in NAV, as they can influence the company’s stock price and shareholder returns. Palmer Square Capital BDC’s management team is responsible for the investment decisions that affect the NAV. The company operates under certain reporting standards as an emerging growth company, ensuring transparency for shareholders. These financial updates are part of Palmer Square Capital BDC’s routine disclosures to provide timely information to the investment community.
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