On Thursday, Wells Fargo (NYSE:WFC) adjusted its outlook on Ally Financial (NYSE: NYSE:ALLY) shares, increasing the price target to $37 from the previous $33 while maintaining an Underweight rating. The firm's decision follows Ally Financial's recent quarterly performance, which aligned with the expectations set by its management.
The company's recent financial results showed consistency with the guidance provided earlier, leading to the price target adjustment. Despite a modest decline in stock value, which analysts attribute to the market's concern over consumer credit in light of raised non-performing auto loan guidance, management had already anticipated this increase, alongside some profit-taking actions.
Wells Fargo has revised its 2024 earnings per share (EPS) estimate for Ally Financial upwards by 61 cents, arriving at $3.56. This increase is largely due to a reduced tax rate resulting from electric vehicle (EV) tax credits and the company's performance in the second quarter, although it is partially offset by a higher provision for the second half of 2024 and a forecast of slower growth in earning assets.
Looking ahead to 2025, the analyst's EPS estimate for Ally Financial sees an increment of 20 cents. This rise is primarily based on the projected ongoing tax rate benefits from EV credits, in addition to minor adjustments in the analytical model.
The new price target of $37 reflects a calculation of approximately 7 times the firm's estimated 2025 earnings per share, bolstered by higher comparable company valuations and a steady consumer credit environment overall.
In other recent news, Ally Financial's performance has been positively evaluated by several analyst firms. RBC Capital Markets raised the price target for Ally Financial to $49, maintaining an Outperform rating. This adjustment was influenced by the company's robust second-quarter earnings, improved margins, and consistent balance sheet performance.
Analysts from Jefferies also increased Ally Financial's share price target from $36 to $40, following an upward revision of the second quarter 2024 diluted adjusted earnings per share (EPS) forecast.
JPMorgan (NYSE:JPM) revised its rating for Ally Financial's stock from Underweight to Neutral, acknowledging improved performance metrics and potential for improved risk-adjusted margins.
The firm also increased the stock's price target to $45.00. BTIG maintained its Buy rating on Ally Financial, citing potential for upside in the company's future earnings, and set a $51.00 price target for the company's shares. Citi initiated coverage on Ally Financial with a Buy rating, setting a price target of $50.00.
These recent developments come amid Ally Financial's stronger-than-anticipated first-quarter revenue of $2 billion and successful navigation of the Federal Reserve's annual stress test.
The company's capital ratio remained robust, demonstrating resilience against potential downturns. These are among the recent developments for Ally Financial, which continues to adapt to the evolving financial landscape.
InvestingPro Insights
Ally Financial's recent performance and Wells Fargo's adjusted outlook are further complemented by insights from InvestingPro. Analysts have shown confidence in the company by revising their earnings upwards for the upcoming period. This optimism is grounded in Ally's consistent profitability over the last twelve months and a large price uptick, with a 60.38% one-year price total return as of the latest data. Additionally, the company has demonstrated a commitment to shareholder returns by maintaining dividend payments for nine consecutive years.
InvestingPro Data underscores the company's financial health, with a P/E ratio adjusted for the last twelve months as of Q1 2024 at 15.43, suggesting a reasonable valuation relative to earnings. Moreover, Ally is trading near its 52-week high, with the price at 97.6% of this peak, indicating strong market sentiment. While revenue has seen a dip, the company's operating income margin remains robust at 14.69%.
For investors seeking more detailed analysis, there are additional InvestingPro Tips available, which delve into the nuances of Ally's financial performance and market position. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking exclusive insights that can further inform investment decisions.
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