On Monday, Piper Sandler adjusted its outlook on First Internet Bancorp (NASDAQ:INBK), reducing the price target to $34 from $35 while maintaining a Neutral rating on the stock. The adjustment follows the company's solid first-quarter results, with expectations that the net interest margin (NIM) will continue to expand throughout the year, even if the Federal Reserve decides to cut rates in the second half of 2024.
The firm acknowledged the attractiveness of First Internet Bancorp's shares for long-term investors, citing a discounted price-to-tangible book value (P/TBV) ratio of 0.74x compared to its peers at 1.2x. This valuation is seen as favorable, especially considering management's efforts to improve profitability. However, the firm remains neutral on the stock, indicating that potential catalysts for a valuation more in line with peers seem limited in the current interest rate environment.
Piper Sandler expressed a cautious stance, suggesting a more positive outlook could emerge with clearer indications of a Federal Reserve policy shift and as the bank's initiatives, including FinTech partnerships, show more progress. The firm noted that these factors could drive a re-rating closer to peer valuations in the future.
The revised price target is based on a 9.0 times multiple of the firm's 2025 earnings per share estimate, which remains unchanged. However, the earnings estimates for 2024 and 2025 have been slightly reduced by 2-3% to $3.00 and $3.75, respectively. This adjustment reflects anticipated higher operating expenses and lower net interest income assumptions. The firm anticipates that the timing of Federal Reserve rate cuts may be delayed, influencing these projections.
In summary, Piper Sandler's updated assessment of First Internet Bancorp reflects a cautious but watchful approach, with an eye on macroeconomic indicators and the bank's strategic developments that could potentially enhance its market valuation.
InvestingPro Insights
According to recent data from InvestingPro, First Internet Bancorp (NASDAQ:INBK) presents a mixed financial landscape. The company's market capitalization stands at a modest $266.86 million, with a Price-to-Earnings (P/E) ratio of 16.06 over the last twelve months as of Q1 2024. This indicates a reasonable valuation compared to industry standards. Additionally, the Price/Book ratio of 0.73 further supports Piper Sandler's observation of the stock's discounted valuation relative to its peers.
InvestingPro Tips highlight several aspects of First Internet Bancorp's performance. The company has demonstrated a high shareholder yield and analysts predict profitability this year, which aligns with Piper Sandler's expectation of NIM expansion. Despite weak gross profit margins, First Internet Bancorp has maintained dividend payments for 13 consecutive years, offering a current dividend yield of 0.77%. Moreover, the stock has experienced a significant price uptick with a 6-month total return of 93.67%, reflecting investor optimism.
For investors seeking further insights and additional InvestingPro Tips, there are 5 more tips available that can be accessed at https://www.investing.com/pro/INBK. These tips could provide valuable context for the company's future performance and help investors make more informed decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment research with comprehensive data and analysis.
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