On Friday, BofA Securities revised its price target on shares of Synovus Financial (NYSE:SNV), reducing it to $40 from the previous $44, while reiterating a Buy rating on the stock. The firm believes that the current stock valuation accounts for possible downside risks to the earnings per share (EPS) outlook. The valuation reflects 1.1 times the year-end 2024 estimated tangible book value per share and 8 times the projected 2025 price-to-earnings ratio, which is below the 9 times peer median.
The analysis highlighted the capital flexibility available to Synovus Financial's management, particularly the ability to carry out share buybacks. The company's capital optimization efforts are seen as a way to defend EPS, especially in light of the forecasted release of approximately 20 basis points in Common Equity Tier 1 (CET1) capital from an anticipated reduction of $1 billion in risk-weighted assets. This reduction could potentially exceed the $1 billion mark.
According to BofA Securities, the expected freeing up of capital should support the continuation of share buybacks. The firm anticipates that Synovus Financial will conduct approximately $45 million in share repurchases per quarter for the remainder of the year.
Despite the lack of a near-term catalyst and the uncertainty surrounding deposit costs that may cause investor caution, the firm views the stock's risk/reward profile as attractive and reaffirms its Buy recommendation.
InvestingPro Insights
Recent InvestingPro data and analysis provide additional context to BofA Securities' assessment of Synovus Financial (NYSE:SNV). With a market capitalization of $4.96 billion and a price-to-earnings (P/E) ratio standing at 12.54, the company presents a valuation that some investors may find appealing. The adjusted P/E ratio for the last twelve months as of Q1 2024 is even more attractive at 11.23, indicating potential undervaluation relative to earnings. Furthermore, the dividend yield as of the latest data is a robust 4.48%, showcasing the company's commitment to returning value to shareholders, a streak it has maintained for 51 consecutive years.
InvestingPro Tips suggest that analysts are optimistic about Synovus Financial's prospects, with three analysts revising their earnings upwards for the upcoming period. Additionally, the Relative Strength Index (RSI) indicates that the stock is in oversold territory, which could signal a buying opportunity for contrarian investors. On the flip side, the stock has experienced a significant decline over the past week, yet it's worth noting that it has seen a large price uptick over the last six months. With analysts predicting profitability this year and the company having been profitable over the last twelve months, the financial health of Synovus Financial appears stable.
For readers interested in deeper analysis, there are more InvestingPro Tips available, which could provide further insights into Synovus Financial's performance and outlook. To discover these additional tips and benefit from real-time metrics and advanced analytical tools, consider subscribing to InvestingPro using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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