On Tuesday, Seaport Global Securities analyst upgraded shares of Navient Corporation (NASDAQ:NAVI) stock from Neutral to Buy, setting a price target of $18.00. Currently trading at $13.92, with a market capitalization of $1.49 billion, Navient's stock has shown resilience with a 4.7% gain year-to-date.
According to InvestingPro analysis, the company appears fairly valued based on its comprehensive Fair Value model. Ryan's decision is grounded in a sum-of-the-parts analysis, which takes into account various components of Navient's business and their individual value contributions.
InvestingPro data reveals that management has been aggressively buying back shares, while maintaining dividend payments for 14 consecutive years with a current yield of 4.6%.
The analyst's assessment includes a valuation of the FFELP (Federal Family Education Loan Program) portfolio at approximately $8.85 per share. This, combined with the company's adjusted cash position of $572 million, or $5.35 per share—considering the expected outcomes of the fourth quarter such as unsecured debt maturity and share repurchases—totals to a value of $14.20 per share. This figure closely aligns with Navient's current stock price.
Furthermore, analyst values Navient's consumer lending segment at seven times the firm's 2025 earnings estimate, equating to $12.50 per share. However, the analyst anticipates an annualized loss of about $180 million from the 'other' segment, which includes corporate overhead and unallocated expenses. Even with this deduction, the sum-of-the-parts analysis suggests a total value of $18.30 per share.
The analyst also notes that the recent change in administration has reduced prepayment risks associated with the FFELP portfolio, and there is optimism regarding the potential for parts of the federal student loan program to be outsourced to the private sector. This could present additional opportunities for Navient, especially in the consumer lending segment.
Despite acknowledging the lack of a clear strategic vision from Navient's management and the potential risks associated with the upcoming 2025 guidance, analyst believes that any shortfalls in performance will be temporary. Consequently, he has adjusted the 2025 earnings estimate from $1.35 to $1.25 per share, but maintains a positive outlook on Navient as a sum-of-the-parts investment rather than focusing solely on earnings.
The company maintains strong financial health with a current ratio of 9.57, indicating robust liquidity. For deeper insights into Navient's financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which includes additional valuable metrics and expert analysis.
In other recent news, Navient Corporation has reported mixed financial outcomes for the third quarter of 2024, with a GAAP EPS loss of $0.02 but a robust core EPS of $1.45. Despite the earnings loss, Navient exhibited substantial year-over-year growth in loan originations, reaching $1.37 billion, a 39% increase.
Analyst firm TD Cowen maintained a sell rating on Navient but reduced the price target from $14.00 to $13.00, mainly due to lower-than-expected fee revenue and a higher loan loss provision.
Furthermore, Navient has extended its cooperation agreement with Sherborne Investors Management LP through June 2025, indicating a continuation of their collaborative relationship. In a significant shift, Navient decided to sell its Government Services business to an affiliate of Gallant Capital Partners (WA:CPAP), aiming at streamlining its operations and focusing on core business areas.
These are among the recent developments shaping Navient's current position. Jefferies maintained a Hold rating on Navient but reduced the price target from $15.00 to $14.00, anticipating that the upcoming earnings call will concentrate on various key aspects of Navient's business and financials.
The firm's analysts have pointed out that Navient is in the process of executing strategic initiatives to revitalize the company amidst a changing regulatory landscape.
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