Piper Sandler has maintained its Overweight rating on shares of Hercules Capital Inc (NYSE: NYSE:HTGC) and increased the price target to $22.50 from the previous $22.00 in view of the company's recent performance and future prospects in light of the current rate environment and its impact on investment income and credit quality.
Hercules Capital's latest earnings slightly missed Piper Sandler's estimates but aligned with the consensus on Wall Street. Despite this, the results were deemed solid due to the strength in investment income and the stability of credit quality, which has remained relatively unaffected by fluctuating interest rates.
The company has reported that only two of its loans are non-accrual, indicating a strong credit portfolio.
Piper Sandler anticipates a modest decline in Hercules Capital's earnings per share (EPS) as the effects of rate cuts permeate through its floating rate portfolio. Nonetheless, the firm's outlook remains positive, predicting that lower interest rates will likely spur increased venture capital activity and sustain the benign credit quality.
Consequently, Piper Sandler has revised its EPS estimates for Hercules Capital downward for 2024 and 2025 to $2.03 and $2.09, respectively, from the earlier projections of $2.09 and $2.15.
The new price target of $22.50 is founded on an adjusted multiple of 185% of the net asset value (NAV) estimate for one year out, an increase from the previous 180%.
InvestingPro Insights
As Hercules Capital Inc (NYSE:HTGC) navigates a changing rate environment, recent data from InvestingPro underscores the company's financial performance and market position. Hercules Capital boasts a market capitalization of $3.41 billion, reflecting its substantial presence in the investment sector. The company's P/E ratio stands at a competitive 9.65, which may appeal to value-oriented investors looking for potentially undervalued opportunities.
From a revenue perspective, Hercules Capital has demonstrated impressive growth. The company's revenue for the last twelve months as of Q1 2024 stands at $477.13 million, with a remarkable year-over-year growth of 31.94%. This is complemented by a quarterly revenue growth of 15.67% in Q1 2024. Such growth figures are indicative of the company's ability to expand its financial footprint despite prevailing market conditions.
InvestingPro Tips highlight Hercules Capital's consistent dividend payments for 20 consecutive years, which currently yield an attractive 9.01%. This commitment to returning value to shareholders is a key consideration for income-focused investors. Additionally, the company's stock has been trading near its 52-week high, signaling strong market confidence. For investors seeking further insights, InvestingPro provides additional tips on Hercules Capital, offering a comprehensive view of the company's investment potential.
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