On Monday, BofA Securities initiated coverage on Navient (NASDAQ:NAVI) Corporation (NASDAQ:NAVI) stock, a company known for its involvement in student loan servicing and collection. The firm set a Neutral rating on the stock, along with a price target of $17.00.
Navient holds a substantial legacy portfolio of federal student loans, valued at approximately $33 billion. Additionally, the company has expanded into the private student lending market, offering in-school loans and refinancing options. This move marks Navient as a relatively new player in the private sector of student lending.
The company's fundamentals have faced challenges due to its significant holdings of amortizing assets. However, BofA Securities notes that Navient is actively taking steps to pivot and improve its financial standing. The firm's analysts acknowledge the efforts made by Navient to address the pressures on its business model and to set a new strategic direction.
Despite these efforts, BofA Securities points out that there are risks associated with the execution of Navient's new strategy. The firm believes that the current stock price already reflects these potential risks. This assessment has led to the Neutral rating, indicating a stance that the stock is expected to perform in line with the broader market or the sector.
Navient's focus on both federal and private student loans positions it in a unique spot within the financial services industry. As it navigates the challenges of managing a legacy loan portfolio while expanding into new areas of lending, the company's performance will continue to be monitored by investors and analysts alike.
In other recent news, Navient Corporation has completed the sale of its healthcare services business, Xtend Healthcare, LLC, to Coding Solutions Acquisition, Inc. (CorroHealth) for a total consideration of $369 million.
This move is part of Navient's strategic plan to divest its Business Processing segment's equity interests and focus on its core business areas.
The company has also recently settled with the Consumer Financial Protection Bureau (CFPB) over a lawsuit filed in 2017, agreeing to a $120 million fine.
This settlement had a minor impact on Navient's third-quarter earnings for 2024, with a $0.10 negative impact on earnings per share. Navient's shift away from federal student loan servicing has also been noted, with its federal student loan servicing contract transferred to a third party in 2021 and an agreement to outsource its Federal Family Education Loan Program servicing portfolio to MOHELA starting July 2024.
Analysts from TD Cowen have maintained a Sell rating on Navient, while Morgan Stanley held an Equalweight rating. Navient also declared a third-quarter dividend of $0.16 per share and updated its full-year 2024 earnings per share guidance to $1.35 to $1.55.
InvestingPro Insights
Recent data from InvestingPro offers additional context to Navient Corporation's (NASDAQ:NAVI) financial position and market performance. As of the latest quarter, Navient's market capitalization stands at $1.69 billion, with a price-to-earnings (P/E) ratio of 11.12. This relatively low P/E ratio, coupled with a price-to-book value of 0.61, suggests that the stock may be undervalued compared to its assets and earnings.
InvestingPro Tips highlight that Navient has maintained dividend payments for 14 consecutive years, currently offering a dividend yield of 4.15%. This consistent dividend history aligns with BofA Securities' observation of the company's efforts to improve its financial standing and may appeal to income-focused investors.
Another relevant InvestingPro Tip notes that management has been aggressively buying back shares. This action could be interpreted as a sign of confidence in the company's future prospects, potentially supporting BofA's Neutral rating.
It's worth noting that InvestingPro provides 7 additional tips for Navient, offering a more comprehensive analysis for investors seeking deeper insights into the company's financial health and market position.
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