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On Monday, Oppenheimer adjusted its outlook on shares of Sachem Capital Corp . (NYSE:SACH), reducing the price target to $4.00 from the previous $4.50. Despite this change, the firm maintained its Outperform rating on the stock. This revision follows the company's second-quarter earnings report released last Wednesday.
The decrease in the stock price target is primarily due to an increase in the Current Expected Credit Loss (CECL) provision that Sachem Capital recorded in the second quarter. This provision is an estimate of expected credit losses over the life of a loan, indicating the company is setting aside more reserves for potential loan defaults.
Oppenheimer's revised 2024 earnings per share (EPS) estimate for Sachem Capital now stands at $0.17, a significant drop from the prior estimate of $0.39. This adjustment reflects the impact of the higher CECL provision on the company's financials.
Looking ahead to 2025, the firm has a slightly more positive view, raising its EPS estimate to $0.44 from the previous forecast of $0.42. The analyst expressed a cautious optimism for the potential improvement in industry fundamentals, which may benefit Sachem Capital in the longer term.
The changes to the price target and earnings estimates are based on the latest financial data released by Sachem Capital, providing investors with updated guidance on the company's performance and expected future earnings.
In other recent news, Sachem Capital Corp. reported a GAAP earnings per share (EPS) of ($0.09) for Q2 2024, falling short of Jones Trading's estimate and the consensus mean. Despite this, Sachem Capital achieved an adjusted EPS of $0.09, thanks to an $8.5 million credit loss provision taken during the quarter. The company's revenue for the same quarter was reported at $15.1 million, with a net loss of $4.1 million for common shareholders.
These recent developments also include Jones Trading maintaining a Hold rating on Sachem Capital. The firm's analysis attributes the deviation from the expected GAAP EPS to a higher-than-anticipated Current Expected Credit Loss (CECL) provision, leading to credit reserves making up 280 basis points of the company's total loan portfolio.
Furthermore, Sachem Capital's management is expected to adopt a cautious stance on new loan originations, focusing on protecting the existing loan portfolio. This approach is in response to labor shortages, extended project timelines, and tightening lending standards that have decreased the availability of financing for fix-and-flip projects.
Lastly, Sachem Capital plans for a net portfolio growth of approximately $20 million for the remainder of the year and is considering share buybacks and potentially increasing its credit facility with Needham Bank. The company's strategy in the coming months will likely focus on maintaining liquidity, managing its loan portfolio effectively, and exploring prudent opportunities to leverage its financial position.
InvestingPro Insights
Recent metrics from InvestingPro highlight the financial landscape for Sachem Capital Corp. (NYSE:SACH). With a market capitalization of $109.83 million and a trailing P/E ratio of 45.03, the company is trading at a high earnings multiple. This is underscored by an adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at 35.9. Notably, Sachem Capital offers a significant dividend yield of 13.85%, a factor that may appeal to income-focused investors, especially as the company is expected to remain profitable this year.
InvestingPro Tips suggest that the stock price has been quite volatile, trading near its 52-week low and experiencing a substantial decline over the last three months. This could indicate a potential entry point for investors seeking value, given that the stock has fallen significantly. Moreover, Sachem's liquid assets exceed its short-term obligations, which may provide some financial stability in the short term. For those interested in exploring further, InvestingPro features additional tips and insights on Sachem Capital, which can be accessed through their dedicated platform.
Understanding these financial metrics and InvestingPro Tips can provide investors with a more nuanced view of Sachem Capital's current position and future prospects, complementing the analysis provided by Oppenheimer's recent report.
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