On Tuesday, DA Davidson adjusted its stance on First Mid-Illinois Bancshares (NASDAQ:FMBH), downgrading the stock from Buy to Neutral while increasing the price target to $47.00 from $44.00. The firm acknowledged the bank's solid performance but expressed caution about assigning a higher premium to the stock.
The revision comes in the wake of increased trading multiples for banks following the 2024 U.S. Presidential Election. DA Davidson cited the bank's potential to reengage as a merger and acquisition (M&A) buyer, which historically has led to underperformance in its shares, as a reason for the downgrade. Additionally, the analyst pointed to the bank's rate and growth positioning, which is viewed as less attractive compared to its higher-growth peers.
Despite the upgrade in the price target, which suggests a belief in the bank's value, the firm's downgrade is based on a projection of less than a 15% total return for FMBH shares. This anticipated return does not meet the threshold for a Buy rating, leading to the neutral outlook.
The new price target of $47.00 represents a modest increase from the previous target but reflects the firm's recognition of First Mid-Illinois Bancshares' premium performance. The analyst reiterated the view that FMBH shares deserve a premium valuation, which has been factored into the revised target.
The update from DA Davidson provides investors with a revised expectation for FMBH's stock performance, suggesting a more conservative approach in light of the bank's potential M&A activity and its comparative growth prospects.
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