On Monday, Piper Sandler adjusted its price target for First Internet Bancorp (NASDAQ:INBK), increasing it to $40.50 from the previous $29.00. The firm maintained a Neutral rating on the stock.
The revision follows the company's second-quarter results, which showcased a 15% pre-provision net revenue (PPNR) upside, attributed largely to a surge in Small Business Administration (SBA) revenue.
The analyst noted that First Internet Bancorp's credit metrics remained stable, and the current price to tangible book value (P/TBV) valuation of 0.92x is considered attractive for long-term investors, especially in light of the management's ongoing profitability improvement initiatives. However, the firm's stance remains Neutral due to limited catalysts that could bring the company's valuation closer to its peers, which stand at 1.62x.
First Internet Bancorp's potential to benefit from anticipated Federal Reserve rate cuts was acknowledged, yet Piper Sandler expressed the need for greater visibility into the bank's ability to consistently achieve profitability comparable to its peers.
The firm's 2024 estimated operating earnings per share (EPS) remains unchanged at $3.00, while the 2025 estimate was increased by 8% to $4.05, reflecting higher expected SBA revenue as the company continues to gain momentum in this area.
The new price target of $40.50 represents an $11.50 increase and is based on a 10.0x multiple of the firm's 2025 estimated EPS. This multiple is a 2.0x increase over the previous estimate, reflecting higher peer multiples. Despite this, the target still implies a discount to peers, who are valued at around 10.5x, due to First Internet Bancorp's below-average profitability outlook.
In other recent news, First Internet Bancorp has reported an 11.5% increase in net income for the second quarter of 2024, amounting to $5.8 million. This growth is accompanied by a 11.7% rise in diluted earnings per share, which now stands at $0.67. The bank also recorded a 2.9% growth in net interest income, with an expansion of 1 basis point over the last quarter.
These developments are largely attributed to the significant growth in the bank's Small Business Administration (SBA) lending and fintech partnerships. However, it's worth noting that certain portfolio segments like single tenant lease financing and public finance have seen a decline due to market competition and an inverted yield curve.
Despite these challenges, First Internet Bancorp maintains a positive outlook for 2024, projecting an annual earnings per share around $3. The bank's strong performance in the first half of the year, coupled with its robust pipelines, are expected to fuel continued growth in net interest income.
InvestingPro Insights
Recent data from InvestingPro underscores the momentum behind First Internet Bancorp (NASDAQ:INBK). With a market capitalization of $338.91 million and an attractive P/E ratio of 18.23, reflecting its earnings potential, the bank is positioned in a favorable light for investors considering its financial health. The InvestingPro data also highlights a robust revenue growth of 11.8% over the last twelve months as of Q2 2024, which aligns with Piper Sandler's observations regarding the surge in SBA revenue.
InvestingPro Tips further inform us that First Internet Bancorp is expected to see net income growth this year, which may be a factor contributing to the analyst's revised price target. Additionally, the bank has shown a significant return over the last week with a 9.16% price total return, and it is trading near its 52-week high, indicating strong market confidence. For investors seeking more in-depth analysis, there are over ten additional InvestingPro Tips available, which can be accessed with a subscription. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain insights that could help in making more informed investment decisions.
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