On Thursday, DA Davidson showed continued confidence in Veritex Holdings (NASDAQ: NASDAQ:VBTX), raising its price target to $29 from the previous $27, while maintaining a Buy rating on the stock. The firm's analysis highlighted Veritex's second-quarter performance, which demonstrated a steady control over deposit costs and an increase in non-interest income (NII) due to net interest margin (NIM) and balance sheet growth.
The firm noted that Veritex's daily average deposits (DDA) saw quarter-over-quarter growth, contributing to the bank's solid financial standing. The analyst projected that the NII growth might slow down as the Federal Reserve starts to reduce interest rates, considering the bank's asset-sensitive balance sheet. However, they also identified that the bank's short-term funding strategy could provide an advantage in catching up with market changes in the latter part of 2025.
Veritex's potential to increase earnings per share (EPS) was also mentioned, with the United States Department of Agriculture (USDA) and Small Business Administration (SBA) gain on sale income being pinpointed as a positive influence for future earnings.
The updated price target of $29 reflects the firm's reassessment of Veritex's value based on its recent financial outcomes and the bank's ability to navigate the changing economic landscape. The firm reiterated its Buy rating, signaling its belief in the continued upward trajectory of Veritex Holdings' stock performance.
In other recent news, Veritex Holdings has been a focus of several financial services firms. Piper Sandler increased its price target for Veritex to $27, noting quarter-over-quarter improvements in deposit and credit trends.
This new price target is based on approximately 12 times the estimated earnings for 2025, reflecting potential growth.
Similarly, Stephens also raised its price target to $27, maintaining an Equal Weight rating on the stock. This adjustment followed Veritex's Q2 2024 results, which highlighted strong net interest income and effective cost management.
In addition, Veritex has declared a quarterly cash dividend of $0.20 per share, continuing its pattern of returning value to shareholders. The company reported Q1 2024 earnings of $29.1 million, or $0.53 per share, and initiated a $50 million stock repurchase program. These recent developments indicate a proactive approach to strengthening its balance sheet.
Analysts anticipate stable credit metrics for the next quarter and expect Veritex's balance sheet enhancement strategy to be fully implemented by the end of 2024. Earnings estimates for 2025 have been revised upwards by 7% due to the removal of several anticipated rate cuts and heightened expectations for loan growth.
InvestingPro Insights
Amidst DA Davidson's optimistic outlook for Veritex Holdings, InvestingPro data presents a nuanced perspective on the bank's financial health and performance. With a market capitalization of $1.32 billion and a P/E ratio that has slightly decreased from 14.97 to an adjusted 14.89 over the last twelve months as of Q2 2024, Veritex shows stability in its earnings valuation. Notably, the bank's return on assets for the same period stood at 0.7%, reflecting a modest efficiency in utilizing its assets to generate profits.
InvestingPro Tips highlight Veritex's strong performance in the short term, with a remarkable 19.55% price total return over the last month and an 18.65% return over the last three months. Additionally, analysts are optimistic, predicting profitability for the current year, a sentiment supported by the bank's profitability over the last twelve months. However, potential investors should be aware of the bank's weak gross profit margins, which could impact future earnings.
For those considering an investment in Veritex Holdings, the insights offered by InvestingPro extend beyond the surface-level metrics. With additional tips available on the platform, investors can delve deeper into the company's financials and market position. Utilize the coupon code PRONEWS24 to receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to the full breadth of InvestingPro's analysis, which currently includes five additional tips for Veritex Holdings.
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