On Thursday, Deutsche Bank (ETR:DBKGn) adjusted its price target on Funding Circle Holdings Plc (FCH:LN) (OTC: FDCHF) shares to GBP2.10 from GBP2.50, while maintaining a Buy rating on the stock.
The revision reflects anticipated changes in the company's operations, including the transition of its U.S. segment to discontinued operations net of tax for the fiscal year 2024, ahead of a projected sale.
The firm's analyst pointed out that alongside the reclassification of the U.S. business, the estimates for Funding Circle's ongoing ventures have been updated to account for more conservative projections for UK small and medium-sized enterprise (SME) lending in the future. The analyst noted that due to the operational shift, comparisons of new and old estimates above the net profit level would not be meaningful.
The bank highlighted that Funding Circle's continued investments and the resulting high operating leverage mean that even minor adjustments in loan volumes and total income can lead to significant percentage changes in net profit and earnings per share (EPS).
Despite these adjustments, the analyst confirmed that the forecasts for fiscal years 2024 and the medium-term outlook for 2026 remain aligned with the company's own guidance for its two continuing divisions, UK loans and FlexiPay, as well as at the group level.
Funding Circle, which specializes in lending to SMEs, is undergoing strategic changes with the anticipated sale of its U.S. operations. The company's focus is shifting towards its UK loan services and FlexiPay, a payment solution designed to provide flexible financing options for businesses. The revised price target from Deutsche Bank reflects the impact of these strategic adjustments on the company's financial projections.
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