Piper Sandler has updated its outlook on ServisFirst Bancshares (NYSE: NYSE:SFBS), raising the price target to $79.00 from the previous $76.00. The firm maintained a Neutral rating on the stock.
The adjustment follows ServisFirst's third-quarter performance, which surpassed expectations, and the anticipation of reduced expenses coupled with continued growth in net interest income (NII).
The analyst at Piper Sandler revised the earnings estimate for 2024 to $4.05, up from $3.73, citing the recent quarterly beat. The forecast for 2025 was also increased to $4.62 from $4.43. The revisions are based on lower projected expenses and sustained NII growth.
Additionally, a new 2026 earnings estimate was set at $5.25, suggesting a 12% NII increase for that year, driven by ongoing net interest margin (NIM) expansion and robust loan growth.
The price target hike to $79 is underpinned by a consistent 16 times price-to-earnings (P/E) multiple applied to the firm's 2025 earnings projection, plus a dollar-per-share credit for excess capital. Despite the higher price target, the analyst noted that ServisFirst shares are still considered pricey based on earnings.
In the commentary provided by the analyst, the outlook for ServisFirst is cautiously optimistic. The bank is expected to benefit from a favorable NII trajectory and solid loan expansion, which are key factors behind the raised earnings estimates and price target. The analyst expressed confidence in the bank's valuation model, despite acknowledging the high cost of the shares relative to earnings.
In other recent news, ServisFirst Bancshares reported a robust performance in its third-quarter earnings call. Despite flat loan growth, the bank's net income and net interest margin increased, and strong loan demand in the hospitality sector was observed. The company is also undergoing leadership changes, with CFO Kirk Pressley resigning and Ed Woodie stepping in as Interim CFO.
The bank's financial health appears to be strong, with an improved efficiency ratio and a steady credit quality. Non-interest income performed well, and there's an anticipation of better returns with over $300 million in CDs maturing in the fourth quarter.
InvestingPro Insights
ServisFirst Bancshares' recent performance and future outlook align with several key metrics and insights from InvestingPro. The company's P/E ratio of 22.97 reflects the analyst's observation that the shares are still considered pricey based on earnings. However, this valuation should be viewed in the context of ServisFirst's strong financial performance.
InvestingPro data shows that ServisFirst has a robust operating income margin of 61.78% for the last twelve months as of Q2 2024, indicating efficient operations that support the analyst's expectation of reduced expenses. The company's revenue growth of 6.96% in Q2 2024 also aligns with the anticipated continued growth in net interest income.
Two InvestingPro Tips are particularly relevant to the article's content:
1. ServisFirst "has raised its dividend for 10 consecutive years," which speaks to the company's financial stability and commitment to shareholder returns.
2. The company has seen a "large price uptick over the last six months," with InvestingPro data showing a 36.24% price total return over that period. This trend supports the analyst's decision to raise the price target.
These insights are just a sample of the valuable information available on InvestingPro. Investors can access 8 additional tips and a comprehensive set of financial metrics to gain a deeper understanding of ServisFirst Bancshares' financial health and market position.
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