On Thursday, Keefe, Bruyette & Woods adjusted its price target for Live Oak Bancshares (NASDAQ: NYSE:LOB), reducing it to $40 from the previous $45. The firm maintained its Market Perform rating on the stock. This move followed a significant 15% drop in the bank's shares during Thursday's trading session after the company reported its first-quarter results.
The results, which were slightly below expectations, coupled with a minor revision in guidance, prompted a sharp market reaction. Keefe, Bruyette & Woods noted that the market might be overreacting to the bank's updated net interest income (NII) guidance. While the current consensus for fiscal year 2024 NII growth is at 13%, the bank's management expects an increase in the high-single to low-double-digit range, with the low-double-digits being more probable in a stable environment. The firm has set its own expectation at a 10.5% increase.
The firm also cited a decrease in noninterest income run-rate as a reason for the adjustment, pointing out that gains on sale (GOS) premiums are not expected to rise above first-quarter levels unless interest rates decrease. This forecast has led to slight reductions in the firm's earnings per share (EPS) estimates for Live Oak Bancshares.
Despite the lowered price target, Keefe, Bruyette & Woods reiterated its Market Perform rating, indicating that the firm does not see the stock outperforming or underperforming the market in the near future. The rating suggests a neutral stance on the bank's shares, as the company navigates through the current financial environment.
InvestingPro Insights
In light of recent market movements and analyst revisions, InvestingPro data provides a deeper dive into Live Oak Bancshares' financial health. The company's Price/Earnings (P/E) ratio stands at 17.36, which may suggest a reasonable valuation relative to earnings. With a Price/Book (P/B) ratio of 1.69, the stock may appeal to value-oriented investors seeking assets that are priced close to their book value. Despite a recent downturn in revenue growth of -15.31% over the last twelve months, the bank has shown a quarterly revenue growth of 21.0%, indicating potential recovery or seasonal strength.
Two key InvestingPro Tips for Live Oak Bancshares suggest a mixed outlook: analysts have recently revised their earnings expectations downwards, and the stock has experienced significant volatility, with a notable decline over the last week. However, the valuation implies a strong free cash flow yield, which could be a positive signal for investors looking for companies with the ability to generate cash. Investors looking to gain more insights into Live Oak Bancshares can find additional InvestingPro Tips at Investing.com. There, users can also explore further metrics and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 10 more InvestingPro Tips available, investors can gain a comprehensive understanding of the stock's potential trajectory.
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