On Friday, Piper Sandler adjusted its outlook on Bridgewater Bancshares Inc . (NASDAQ:BWB), reducing the price target to $14 from the previous $14.50, while retaining an Overweight rating on the stock. This revision follows the company's first-quarter performance, which met expectations, including pre-provision net revenue (PPNR).
The firm noted that while a sustained short-term rate environment might negatively impact Bridgewater Bancshares' net interest margin (NIM) and net interest income (NII) growth, the bank is anticipated to achieve multiple expansion in the current year. This expansion is expected to be driven by Bridgewater's exceptional credit quality, consistent growth in loans and core deposits through market share gains in the Twin Cities, and likely continued robust tangible book value (TBV) growth.
Piper Sandler also revised its earnings per share (EPS) estimates for Bridgewater Bancshares for the years 2024 and 2025, reducing them to $1.00 and $1.25, respectively, from the previous estimates of $1.05 and $1.30. This adjustment is based on lower NIM assumptions following the first-quarter results.
The new price target of $14 reflects a multiple of 11.0 times the firm's estimated 2025 earnings per share, which remains consistent with a premium compared to the peer group average of 8.5 times.
Piper Sandler emphasized Bridgewater's unique position in the Twin Cities market, its prospects for organic balance sheet growth, and a more favorable credit outlook as reasons for the premium valuation.
Lastly, the firm pointed out that Bridgewater Bancshares' price to tangible book value (P/TBV) ratio, standing at 89% relative to its peers at 119%, represents an attractive entry point for investors.
InvestingPro Insights
As Bridgewater Bancshares Inc. navigates through a challenging financial landscape, real-time data from InvestingPro provides a deeper look into the company's current market position. With a market capitalization of $321.15 million and a price-to-earnings (P/E) ratio of 10.61, the company presents an interesting case for investors. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 stands slightly lower at 10.08, potentially indicating a more favorable earnings perspective relative to the stock price.
Despite the concerns over net interest margin pressures, Bridgewater Bancshares has maintained an operating income margin of 47.41% over the last twelve months as of Q1 2024, showcasing the company's ability to manage its operating expenses effectively. However, revenue growth has seen a downturn, with a -15.7% change over the last twelve months as of Q1 2024, which investors should consider when assessing the company's growth trajectory.
InvestingPro Tips highlight that analysts have recently revised their earnings expectations downwards and anticipate a drop in net income this year, which aligns with the revisions made by Piper Sandler. Despite these concerns, analysts predict that the company will remain profitable this year. Furthermore, Bridgewater Bancshares does not currently pay a dividend, which may influence investment decisions for income-focused shareholders.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available that could shed light on Bridgewater Bancshares' future performance. To explore these insights and make more informed investment decisions, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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