On Monday, Piper Sandler adjusted its price target for California BanCorp (NASDAQ:CALB), reducing it to $26.00 from the previous $27.00, while maintaining an Overweight rating on the stock. The adjustment follows a review of the company's first-quarter performance, which indicated a lower starting point for loan growth.
The firm has revised its estimated earnings per share (EPS) for California BanCorp for the years 2024 and 2025 to $2.15 and $2.00, respectively, a decrease from the prior estimates of $2.20 and $2.05. The revision reflects the bank's conservative management of its balance sheet in anticipation of its upcoming merger of equals (MOE) with BCAL, which is expected to be finalized in the third quarter of 2024.
Despite lower-than-anticipated net interest income (NII) and loan growth in the first quarter, California BanCorp was noted for its solid performance, which included in-line pre-provision net revenue (PPNR) supported by prepayment fee income and effective operating expense controls. The bank was also recognized for its improved credit quality, which continues to be among the best in its class.
The new price target of $26 represents a decrease of $1 and is based on a 13.0 times unchanged multiple of the bank's projected 2025 earnings per share. This valuation continues to place California BanCorp at a premium compared to its peers, which trade at an average multiple of 8.4 times earnings.
InvestingPro Insights
As Piper Sandler recalibrates its expectations for California BanCorp, real-time data from InvestingPro provides additional context for investors. The company's market capitalization sits at a modest $183.2 million, and the stock trades at a P/E ratio of 9.16, which is slightly lower than the industry average. This could signal an undervaluation relative to the market, especially considering the company's solid operating income margin of 37.95% over the last twelve months as of Q1 2024.
InvestingPro Tips reveal some challenges and opportunities for California BanCorp. Analysts have recently downgraded earnings expectations, which aligns with Piper Sandler's revised EPS forecasts. However, the company's high return over the last year, at 52.06%, alongside predictions of profitability this year, suggests resilience in the face of headwinds. Notably, California BanCorp does not pay a dividend, which may be a consideration for income-focused investors.
For those seeking a deeper dive into California BanCorp's financials and future prospects, InvestingPro offers additional insights and analytics. There are more InvestingPro Tips available, which could guide investment decisions. Investors can use coupon code PRONEWS24 to receive an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of expert analysis and tips to navigate the markets effectively.
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