On Wednesday, Piper Sandler adjusted its outlook on First Northwest Bancorp (NASDAQ:FNWB), reducing the price target to $12.00 from the previous $17.00, while maintaining a Neutral rating on the stock. The adjustment follows First Northwest Bancorp's modest profitability in the first quarter.
The firm cited several factors behind the decision to lower the price target. Despite a subdued performance in the first quarter, Piper Sandler acknowledged First Northwest Bancorp's ongoing balance sheet optimization initiatives, which are expected to significantly enhance profitability in the future. The firm expressed optimism about the bank's potential to increase its commercial market share in the Puget Sound region and to benefit from existing partnerships, as well as the scarcity value the bank holds in that area.
However, the firm's Neutral stance is based on several considerations, including First Northwest Bancorp's below-average return outlook in the current interest rate environment. The uncertainty surrounding the timing of the resolution of its consent order and the likelihood of a longer timeframe required to close the profitability gap with its peers also contribute to the Neutral rating.
Piper Sandler has revised its 2024 earnings per share (EPS) estimate for First Northwest Bancorp downward to $0.50 from the prior $0.70 estimate. This revision is primarily attributed to changes in the projections for fee income and the loan loss provision outlook. Nevertheless, the firm has decided to maintain its 2025 EPS estimate at $1.10.
The new price target of $12.00 is based on 0.7 times the one-year forward tangible book value (TBV) estimate, a reduction from the previous multiple of 1.0 times. This change reflects lower peer multiples. Despite the reduction, the price target still implies a discount compared to peers, which typically trade at 1.0 times TBV, due to First Northwest Bancorp's less favorable profitability outlook.
InvestingPro Insights
With Piper Sandler's recent adjustment of First Northwest Bancorp's (NASDAQ:FNWB) price target, investors are keenly observing the bank's performance metrics and future potential. According to InvestingPro data, First Northwest Bancorp has a market capitalization of $89.84 million and is trading near its 52-week low, with a price/book ratio for the last twelve months as of Q1 2024 at 0.56, indicating that the stock may be undervalued relative to its assets.
Despite the bank's recent underperformance, InvestingPro Tips suggest there is potential for turnaround. First Northwest Bancorp is expected to see net income growth this year, and the Relative Strength Index (RSI) indicates the stock is currently in oversold territory, which could signal an upcoming rebound. However, it is important to note that the bank has not been profitable over the last twelve months and has experienced weak gross profit margins.
For investors looking for a deeper dive into First Northwest Bancorp's future prospects, there are additional InvestingPro Tips available, which can be found at: https://www.investing.com/pro/FNWB. Readers of this article can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights that could guide investment decisions. There are 5 more tips waiting to be discovered on InvestingPro, offering a comprehensive analysis for those considering this investment.
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