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Investing.com - Wells Fargo initiated coverage on SLM Corp (NASDAQ:SLM) with an Overweight rating and a $38.00 price target on Monday. The stock, currently trading at $31.73, has already delivered a strong 49% return over the past year.
The financial services firm cited SLM’s "attractive" valuation and "impressive business model" with over 50% market share in the private student lending market that continues to grow. According to InvestingPro data, the company trades at a P/E ratio of 15.8x and maintains a solid market capitalization of $6.64 billion.
Wells Fargo highlighted SLM’s "powerful loan sale/stock buyback strategy" as a key strength, while also noting the PLUS program presents "meaningful upside potential" for the company. InvestingPro analysis reveals 8 analysts have recently revised their earnings expectations upward, with analyst targets ranging from $35 to $44.
The $38 price target is based on approximately 11 times Wells Fargo’s 2026 earnings estimate of $3.55 per share, using a sum-of-the-parts methodology that applies different multiples to core earnings versus gain-on-sale and reserve release earnings.
The firm stated it is comfortable with the multiple being above SLM’s historical valuation and at the higher end of consumer finance companies’ multiples, given SLM’s dominance in private student lending and potential upside from federal student loan reform.
In other recent news, Sallie Mae reported second-quarter earnings that did not meet analyst expectations. The company posted earnings per share of $0.32, falling short of the consensus estimate of $0.49. This shortfall was partly due to a significant increase in the provision for credit losses, which rose to $149 million from $17 million in the same period last year. The increase was attributed to a release of provision from a loan sale in the previous year, an increase in loan commitments, and changes in the economic outlook. Additionally, TD Cowen reiterated its Buy rating for SLM Corp, maintaining a price target of $40.00. This came despite concerns over an increase in early-stage delinquencies reported in the company’s July trust data. TD Cowen suggested that the market reaction to these delinquency concerns was "overdone." These developments are crucial for investors to consider when evaluating Sallie Mae’s financial health.
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