Stephens raises Capital Bancorp target to $36, maintains overweight

On Wednesday, Stephens analyst Brody Preston updated the price target for Capital Bancorp (NASDAQ: NASDAQ:CBNK), boosting it to $36.00 from the previous $35.00, while reiterating an Overweight rating on the stock. The $504.2 million market cap bank’s momentum is evident in its impressive 58.41% return over the past year. Preston’s decision followed Capital Bancorp’s recent earnings report, which revealed an operating EPS of $0.88, surpassing the consensus estimate of $0.73. InvestingPro data shows two analysts have recently revised their earnings estimates upward for the upcoming period, suggesting continued optimism about the bank’s prospects. The core pre-provision net revenue (PPNR) of $21.8 million also exceeded expectations by approximately $0.06, driven by a net interest income (NII) that was $0.04 above forecasts, in-line fee revenue, and expenses that were $0.01 lower than anticipated.

Capital Bancorp’s end-of-period (EOP) loans saw a significant increase of 7.1% on a linked quarter annualized (LQA) basis, fueled by commercial and industrial (C&I) and commercial real estate (CRE) loans. The company has reiterated its expectation for a double-digit organic growth rate for the year 2025. Stephens forecasts that quarterly NII will continue to grow throughout the remainder of their forecast period, with fee income strength expected to pick up from the first quarter results.

Despite some concerns about higher expenses due to ongoing investments in the franchise, the overall top-line trends are seen as favorable. The acquisition of IFHI has been highlighted as a positive move, adding a niche C&I vertical and a differentiated fee-heavy revenue mix. This acquisition is also expected to help remix the company’s earnings per share (EPS) more towards the commercial banking side.

Capital Bancorp’s stock is currently trading at 8.52 times the forecasted 2026 earnings per share (EPS), with a current P/E ratio of 11.34x. The valuation appears reasonable given the company’s robust return on assets (ROA) of 1.66%—significantly higher than its peers. The bank also offers a dividend yield of 1.32%, having consistently raised its dividend for four consecutive years. InvestingPro analysis indicates the stock is trading near its Fair Value, with additional metrics and insights available to subscribers. Additionally, the stock is trading at 1.35 times the forecasted 2025 tangible book value (TBV), with a return on tangible common equity (ROTCE) approximately 300 basis points above its peers, and an excess capital position of 200 basis points. These financial metrics have reinforced Stephens’ confidence in maintaining an Overweight rating on Capital Bancorp’s shares.

In other recent news, Capital Bancorp Inc. has announced a new stock repurchase program, as detailed in recent SEC filings. The company’s Board of Directors has authorized a buyback of up to $15 million worth of its common stock, which translates to approximately 483,559 shares based on the stock’s closing price as of January 31, 2025. This new buyback initiative is set to expire on February 28, 2026, and represents about 4.1% of the company’s issued and outstanding common stock as of the end of January. The move follows the completion of a previous repurchase plan, which concluded at the end of December 2024, with 543,215 shares bought back. Capital Bancorp plans to repurchase shares on the open market or through privately negotiated transactions, and the program may be adjusted based on market conditions and legal requirements. The company has emphasized that it is not obligated to repurchase a specific number of shares, and the initiative may be suspended or terminated at any time without prior notice. This strategic decision underscores Capital Bancorp’s commitment to managing capital and returning value to its shareholders.

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