Citi downgrades Noah Holdings stock amid mixed operating performance

On Thursday, Citi adjusted its price target for Noah Holdings (NYSE:NOAH) Ltd. American Dep (NYSE: NOAH), reducing it to $14.40 from the previous $17.80, while continuing to recommend a Buy rating for the stock.

The adjustment follows Noah Holdings' report of a weaker non-GAAP net profit after tax (NPAT) for the second quarter of 2024, which showed a significant decline both quarterly and year-over-year.

The company's non-GAAP NPAT for 2Q24 fell by 34.2% from the previous quarter and by 66.1% compared to the same period last year, resulting in a first half NPAT that represents only 38.2% of the 2024 expected consensus estimate. Net revenue also decreased by 5.2% quarter-over-quarter and by 34.6% year-over-year, influenced by a drop in one-time commission and recurring service fees.

Operational profit for Noah Holdings remained subdued in the second quarter, with a year-over-year decrease of 61.6%, although there was a quarter-over-quarter increase of 10.3%. This was attributed to a mixed operating margin trend, which improved by 3.1 percentage points quarter-over-quarter but declined by 15.3 percentage points year-over-year, settling at 21.8% for the quarter.

The decline in operating profit was partly due to increased operational expenses as the company continued reducing its relationship manager headcount and restructuring its business network, cutting city coverage in China from 18 in the first quarter to 11 by August 2024.

Amidst these challenges, Noah Holdings has launched a new US$50 million share buyback program, which is equivalent to approximately 66% of the company's expected non-GAAP NPAT for 2024. Citi's revised price target of $14.40 takes into account more conservative earnings forecasts for the fiscal years 2024 to 2026. Despite the lowered target, Citi maintains a Buy rating on the stock, citing an undemanding valuation and attractive returns for shareholders.

In other recent news, Noah Holdings, has undergone significant developments. The company recently reported a 19.2% year-over-year decrease in total revenues, amounting to RMB 654 million. This decline occurred as Noah Holdings is undergoing strategic business restructuring. Despite the decline, the company revealed that a significant 77.1% of its revenue is derived from its growing overseas business.

Furthermore, JPMorgan has revised its price target for Noah Holdings, setting it at $9.00, down from the previous $13.00, while maintaining a neutral rating on the stock. This revision follows projections of a significant decline in the company's earnings. JPMorgan anticipates Noah Holdings to report a 48% year-over-year decrease in earnings for the second quarter of 2024.

These developments are part of recent trends affecting Noah Holdings. The company's strategic shift towards global markets is seen as a foundation for sustainable growth, despite the challenges it faces in the domestic market. Beyond these issues, Noah Holdings has set an ambitious target to grow its overseas assets under management from the current USD 8 billion to over USD 20 billion within the next 3 to 5 years.

InvestingPro Insights

As Noah Holdings Ltd . (NYSE: NOAH) navigates through its current financial landscape, several key metrics from InvestingPro provide a deeper understanding of its market position. With a market capitalization of $484.85 million, the company is trading at a low Price/Book multiple of 0.32, which may attract value investors looking for potentially undervalued stocks. Additionally, Noah Holdings is currently trading at an earnings multiple of 4.07, which is significantly lower than the industry average, indicating that the stock may be undervalued relative to its earnings potential.

Investors seeking income will note the substantial dividend yield of 14.14%, a compelling figure in today's market. This is particularly relevant given the recent share price decline, with the stock trading near its 52-week low and experiencing a significant drop over the last three months, reflected by a 31.86% negative total return in that period. Moreover, the company's liquid assets surpass its short-term obligations, suggesting a stable financial footing in the near term.

For those considering this investment, there are additional InvestingPro Tips available that delve into the company's financial health and future prospects. In total, there are 11 more tips listed on InvestingPro, which can be accessed for a more comprehensive analysis to inform investment decisions.

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