On Thursday, RBC Capital Markets adjusted its outlook on SLM Corp (NASDAQ:SLM), known as Sallie Mae, increasing the price target to $27 from the previous $25 while maintaining an Outperform rating on the stock.
The firm's analyst highlighted the company's performance in the second quarter, noting solid gains from loan sales, a slight reduction in expenses, and stable credit trends.
SLM Corp's recent earnings recap showed that the company benefited from another strong loan sale gain in the past quarter. The analyst also expressed optimism regarding the company's Private Education Loan (PEL) losses, which have remained relatively stable year-to-date. The expectation is for these losses to remain stable or decline as the year progresses.
The updated full-year outlook for Sallie Mae now anticipates higher earnings per share (EPS) and reduced loss projections. The company's financial forecast for the remainder of the year has been adjusted accordingly, taking into account these revised expectations.
According to the analyst's statement, no further loan sales activities are anticipated in the second half of 2024. This update comes as the firm adjusts its estimates based on the latest financial data and projected trends for SLM Corp.
Investors and market watchers will be keeping an eye on SLM Corp's performance, particularly in the context of the updated targets and the analyst's positive outlook on the company's financial stability and earnings potential.
In other recent news, Sallie Mae has reported a steady growth in the second quarter of 2024, with a slight increase in GAAP diluted EPS to $1.11 per share, up from $1.10 year-over-year. The company experienced a 6% rise in loan originations, amounting to $691 million, and an enhancement in credit quality.
A significant loan sale contributed to a robust gain, and the company has reaffirmed its full-year guidance, expressing confidence in meeting its volume expectations despite uncertainties surrounding the FAFSA form delay.
The company's net private education loan charge-offs decreased, with $80 million reported, down 50 basis points from the previous year. A loan sale of $1.6 billion resulted in $112 million in gains. Sallie Mae has also projected full-year 2024 GAAP diluted EPS to be between $2.70 and $2.80.
Sallie Mae has reaffirmed its 2024 guidance for year-over-year growth in private education loan originations and noninterest expense metrics. The company is also investing in technology to improve customer data relationships and self-service capabilities.
Despite some economic challenges, the company remains focused on maintaining strong credit quality and delivering shareholder value through systematic share repurchases.
InvestingPro Insights
In light of RBC Capital Markets' recent positive outlook on SLM Corp, several InvestingPro Tips reinforce the company's robust financial performance and market position. Notably, SLM's management has been actively engaging in share buybacks, demonstrating confidence in the company's value. Moreover, the company boasts a high shareholder yield, which is a testament to its commitment to returning value to its investors. These actions are complemented by the fact that SLM is trading at a low earnings multiple, with a P/E ratio of 7.26, which suggests that the stock might be undervalued compared to its earnings potential.
InvestingPro Data further highlights SLM's strong market performance. The company has experienced a remarkable revenue growth of 41.26% over the last twelve months as of Q1 2024, and its stock is trading near its 52-week high, at 98.71% of this peak value. Additionally, the company has delivered a strong return over the last month, with a 14.42% increase in its stock price, indicating a positive market sentiment.
For those looking to delve deeper into SLM Corp's prospects, InvestingPro offers additional insights and tips that could guide investment decisions. Currently, there are 8 more InvestingPro Tips available, which could be accessed for a comprehensive analysis. Interested readers can take advantage of a special offer by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing their investment strategy with valuable expert insights.
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