On Wednesday, Jefferies analyst firm increased the price target for Ally Financial (NYSE: NYSE:ALLY) shares to $40.00, up from the previous target of $35.00, while keeping a Hold rating on the stock. Currently trading at $39.65 with a market capitalization of $12 billion, Ally's stock sits within the broader analyst target range of $32 to $56. According to InvestingPro analysis, the stock appears fairly valued based on its comprehensive Fair Value model. The adjustment comes in the wake of Ally Financial's fourth quarter earnings surpassing expectations, attributed to higher revenue and a reduction in provisions.
The company's auto loan delinquency rates and net charge-offs continued to slow compared to the previous year, with the latter outperforming typical seasonal trends due to strong recovery efforts. These positive developments contributed to the analyst's decision to raise the price target. InvestingPro data shows Ally has maintained dividend payments for 10 consecutive years, currently offering a 3.1% yield, while remaining profitable over the last twelve months.
Ally Financial also announced that the sale of its credit card portfolio is expected to be finalized in the second quarter of 2025. This transaction is already factored into the financial forecasts for fiscal year 2025. The guidance provided by the company, both the base and the pro forma, suggests a stable macroeconomic environment.
However, the financial services firm anticipates some challenges in the first quarter of 2025, specifically concerning capital ratios. These expected headwinds are associated with the final phase-in of the Current Expected Credit Loss (CECL) accounting standard and the deferral accounting related to the electric vehicle tax credit. Despite these anticipated challenges, the overall outlook for Ally Financial remains cautiously optimistic as reflected in the updated price target. With an overall Financial Health score of "FAIR" from InvestingPro, which considers multiple factors including growth, profitability, and momentum, investors can access comprehensive analysis and additional insights through InvestingPro's detailed research reports.
In other recent news, Ally Financial has outperformed analyst expectations in its fourth-quarter earnings and revenue results. The financial services company reported adjusted earnings per share of $0.78, surpassing the consensus estimate of $0.58, and revenue of $2.1 billion, exceeding estimates of $2.01 billion. Citi analysts, led by Keith Horowitz, maintained a Buy rating on Ally Financial with a steady price target of $55.00.
In addition to its financial performance, Ally Financial announced strategic operational changes including the sale of its Credit Card business and a halt to new mortgage loan applications. These changes, along with a workforce reduction expected to generate over $60 million in annual savings, are recent developments shaping the company's trajectory.
Ally Financial's consumer auto originations reached $10.3 billion in the quarter, with the highest credit quality tier accounting for 49% of this volume. The company's retail deposits grew by $2.0 billion quarter-over-quarter, with a customer retention rate exceeding 95%. Ally Bank now serves 3.3 million depositors with $143 billion in balances, 92% of which are FDIC insured.
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