Raymond James maintains strong buy on Veritex stock, $31 target

On Monday, Raymond (NSE:RYMD) James reaffirmed their strong confidence in Veritex Holdings (NASDAQ:VBTX), maintaining a Strong Buy rating with a steady price target of $31.00. Currently trading at $24.53, InvestingPro analysis suggests the stock is undervalued, with analyst targets ranging from $31 to $34 per share. For deeper insights into Veritex’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. The firm’s analysis indicates an anticipation of greater than expected share buyback activity for the current quarter. This activity aligns with broader industry trends where loan growth has been subdued and many banks are increasing their share buybacks in the first half of 2025.

Veritex Holdings, which had previously guided to stable loan balances for the first quarter of 2025 and low-to-mid single digit growth for the full year, is now signaling that loan growth may indeed be lackluster in the first quarter, with consensus estimates from Raymond James and Vertical Analysis suggesting a decline in loans held for investment.

Despite these developments, Raymond James views the strategy positively. The firm believes that while the path to achieving a 1% return on assets (ROA) target in the second half of 2025 may be prolonged due to slower growth, Veritex’s management remains committed to the bank’s transformation and improving its fundamental performance. The bank’s current ROA stands at 0.85%, with revenue growing at 7.36% over the last twelve months, indicating progress toward their goals.

The analyst’s comments highlight Veritex’s attractive earnback period on share repurchases, which at 1.4 years, is significantly shorter than the peer median of 3.6 years. This metric suggests that Veritex Holdings can recoup the capital spent on buybacks more quickly than its counterparts, an element that could contribute to the firm’s financial resilience and appeal to investors.

In summary, the reinforced Strong Buy rating and price target reflect Raymond James’ belief in Veritex Holdings’ strategic actions and potential for improved performance, despite the current environment of subdued loan growth within the banking sector. InvestingPro data reveals additional insights, including a price-to-book ratio of 0.83 and an overall Financial Health Score of "FAIR." Subscribers can access more than 10 additional ProTips and detailed financial metrics through the platform’s comprehensive analysis tools.

In other recent news, Veritex Holdings Inc . reported its fourth-quarter 2024 earnings, showing an earnings per share (EPS) of $0.54, which was slightly below the forecast of $0.56. The company’s revenue also did not meet expectations, coming in at $106.19 million against a projected $112.52 million. Veritex Holdings has extended its stock buyback program through March 2026, allowing for the repurchase of up to $50 million of its outstanding common stock. The decision to extend the buyback program was made by the Board of Directors and is expected to be funded through the company’s cash reserves and operational cash flow.

In addition to these financial updates, Veritex Holdings is focusing on government-guaranteed loans and treasury management improvements, aiming for a 1% return on assets in 2025. The company is also working on enhancing its fee income businesses and reducing deposit costs. Despite the earnings miss, Veritex Holdings’ stock showed resilience in aftermarket trading. The company’s tangible book value per share increased by 10.9% year-over-year, indicating strong equity growth.

Furthermore, Veritex Holdings announced a management transition with CFO Terry Early set to retire in June 2025. Will Hofford, who has been with the company for thirteen years, will take over as the new CFO. These developments reflect Veritex Holdings’ strategic efforts to navigate current challenges and position itself for future growth.

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