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On Tuesday, Piper Sandler analyst Nathan Race adjusted the price target for Midland States Bancorp (NASDAQ:MSBI) shares, decreasing it to $23.00 from the previous $28.00 while maintaining a Neutral rating for the stock. The revision comes after the company made several challenging but potentially beneficial decisions in the fourth quarter. The stock, currently trading at $20.07, sits near its 52-week low of $19.51, while offering a substantial 6.18% dividend yield. InvestingPro analysis indicates the stock is currently trading below its Fair Value, with analyst targets ranging from $21 to $29.
Race noted that the difficult choices made in the fourth quarter led to increased net charge-offs (NCOs) and loan loss provisions (LLP), but these measures could potentially pave the way for improved long-term franchise value. The analyst expressed optimism that this "kitchen sink" quarter would result in less credit noise and enhance the quality of earnings for MSBI, thus improving the bank's franchise value moving forward. InvestingPro data reveals several positive indicators, including an expected increase in net income this year and RSI suggesting oversold conditions. Subscribers can access 10 additional ProTips for deeper analysis.
Despite the optimistic outlook for the bank's future credit metrics, Piper Sandler remains neutral on MSBI stock. The firm cites limited visibility on the bank's path to achieving a profitability profile similar to its peers and prefers to wait for a few quarters of benign credit before changing its stance. Race also mentioned that the shares' price to tangible book value (P/TBV) of 94% could be attractive to long-term investors, especially as cleaner credit metrics are expected to emerge. The bank maintains a market capitalization of $431.39 million and has consistently raised its dividend for nine consecutive years, demonstrating commitment to shareholder returns despite current challenges.
The analyst has also revised the earnings per share (EPS) estimates for MSBI, lowering the 2025 and 2026 forecasts to $2.58 and $2.85, respectively, from the previous $2.70 and $2.90. This adjustment reflects a smaller loan portfolio and higher operating expenses following the fourth quarter's outcomes. The new price target of $23.00 is based on 9.0 times the estimated 2025 EPS and is consistent with a discount to peers, who are trading at 11.2 times, due to sub-optimal credit and profitability factors as well as MSBI's lower capital base.
In other recent news, Midland States Bancorp has announced the retirement of Douglas J. Tucker, Senior Vice President and Corporate Counsel. The company has not yet provided information on a successor or the reasons for Tucker's retirement. This development comes alongside the appointment of Travis Franklin to Midland States Bancorp's Board of Directors.
On the financial front, the bank's Q3 results led Piper Sandler to adjust its stock price target to $27.00, up from $26.00, while maintaining a neutral stance. The bank's third-quarter performance showcased higher-than-expected net interest income and core fee income, leading to pre-provision net revenue surpassing estimates. Consequently, Piper Sandler revised upward the earnings per share estimates for Q4 2024 and the full year 2025 to $0.73 and $2.70, respectively.
However, despite these positive developments, DA Davidson, Keefe, Bruyette & Woods, and Stephens adjusted their price targets for the company due to lower expectations for net interest income and anticipated increases in credit costs, yet maintained their ratings on the company's stock. These recent developments reflect the evolving financial landscape of Midland States Bancorp.
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