B.Riley has maintained a positive stance on Atlanticus Holdings Corp. (NASDAQ: ATLC), reiterating a Buy rating and a $50.00 price target for the company's stock. The firm's analyst pointed to a potential upside of over 50% for Atlanticus shares within the next 12 months.
The optimism stems from an anticipated credit improvement, margin expansion, and sustained double-digit portfolio growth, which are expected to contribute to mid-teens earnings growth by 2026.
Atlanticus Holdings Corp. has been favored by B.Riley since the 24th Annual B. Riley Securities Institutional Investor Conference on May 28, 2023. The company's counter-cyclical business model is highlighted as a strength, particularly in times when traditional banks become more conservative. Atlanticus' data-driven underwriting approach is seen as a key factor in managing credit risk and optimizing returns.
Despite a general slowdown in the specialty finance sector, Atlanticus is projected to reach mid-20%-ROE by 2026, thanks to its strategic positioning.
The analyst noted that the company's bottom-line earnings are currently subdued due to conservative fair value adjustments, which were particularly pronounced in the second quarter of 2024. This was partly due to the anticipation of regulatory caps on late payment fees, which may not come into effect.
The earnings forecast for the fiscal years 2024, 2025, and 2026 has been adjusted from $4.85, $7.00, and $8.28 per share to $4.50, $6.15, and $7.40 per share, respectively. The revision takes into account the volatility in accounting practices.
However, the analyst believes that Atlanticus could achieve earnings of over $7 per share once the current accounting inconsistencies are resolved and the company refinances its high-cost Class B preferred stock.
In other recent news, Atlanticus Holdings Corporation made significant strides in the financial sector. The fintech company recently priced its public add-on offering of $55 million in senior notes, which are part of a larger issuance adding to the previously released $57.25 million in senior notes.
The proceeds are intended for redeeming part of the Class B preferred units of a subsidiary or for general corporate purposes.
In terms of earnings, the company's first-quarter earnings for 2024 met expectations, with a net income of $19.9 million. Despite new late fee rules introduced by the Consumer Financial Protection Bureau, Atlanticus implemented additional fees and new product features, projected to fully mitigate the new rules' effects by mid-2025.
InvestingPro Insights
As Atlanticus Holdings Corp. (NASDAQ: ATLC) captures the attention of analysts with its promising growth prospects, real-time data from InvestingPro adds a deeper layer of insight into the company's financial health and market performance. The company's market capitalization stands at an adjusted $453.25 million, reflecting its scale within the specialty finance sector. A notable point for investors is ATLC's attractive price-to-earnings (P/E) ratio, which is currently at 6.05, suggesting that the stock could be undervalued compared to its earnings potential. This is further supported by an adjusted P/E ratio for the last twelve months as of Q2 2024 at 5.91.
InvestingPro Tips highlight that analysts have recently revised their earnings expectations upward for the upcoming period, indicating a positive outlook on the company's financial performance. Additionally, Atlanticus' stock price movements have been quite volatile, which could present opportunities for investors with a higher risk tolerance. It's also worth noting that Atlanticus does not pay a dividend, which may influence investment decisions depending on individual income strategies. For those seeking more detailed analysis, InvestingPro offers additional tips on Atlanticus Holdings Corp., which can be found at: https://www.investing.com/pro/ATLC.
Investors interested in the specialty finance sector and Atlanticus' position within it can find further insights and tips on InvestingPro, which currently lists a total of 9 additional tips for the company, providing a comprehensive view of its investment potential.
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