On Friday, Stephens, a financial services firm, raised its price target on shares of Texas Capital Bancshares (NASDAQ:TCBI) to $75 from the previous $73, while maintaining an Overweight rating on the stock.
This adjustment comes in the wake of Texas Capital Bancshares' second-quarter earnings report for 2024, which showed earnings per share (EPS) and pre-provision net revenue (PPNR) that did not meet expectations. The shortfall was attributed mainly to net interest income (NII) challenges and a slowdown in held-for-investment (HFI) loan growth, excluding multifamily (MF) loans.
The company's revised guidance for 2024 suggests a deceleration in revenue and PPNR growth. Despite the more cautious outlook, Stephens believes the revised forecast aligns with current investor sentiment and more conservative consensus estimates. The firm anticipates an improvement in operating metrics in the third quarter of 2024 due to the seasonal nature of the multifamily business.
Looking forward to 2025, Stephens expects Texas Capital Bancshares to see enhanced profitability, driven by the maturation of hedges and the introduction of new business lines. However, it is noted that the forecasted return on assets (ROA) remains below the company's target of greater than 1.10%. Consequently, Stephens has adjusted its EPS forecast downward to reflect the softer second-quarter performance and the updated company guidance.
The new price target of $75 represents a multiple of 17.7 times Stephens' EPS forecast for 2025 and 1.1 times the firm's 12-month forecast of tangible book value per share (TBVPS). Stephens' Overweight rating indicates a positive outlook on the stock, suggesting a belief that Texas Capital Bancshares will perform well relative to the market or its sector in the future.
InvestingPro Insights
In light of Stephens' revised price target for Texas Capital Bancshares (NASDAQ:TCBI), a look at the company's real-time data and insights from InvestingPro can provide additional context for investors. The company's market capitalization stands at $3.03 billion, with a Price/Earnings (P/E) ratio of 19.46, which adjusts slightly to 19.14 when considering the last twelve months as of Q1 2024. This suggests that the company is trading at a fair valuation relative to its earnings. Moreover, Texas Capital Bancshares has demonstrated a strong return over the last month, with a 14.59% price total return, indicating a positive short-term momentum for the stock.
However, it's important to consider that analysts have revised their earnings downwards for the upcoming period, reflecting some caution about the company's future earnings potential. Additionally, Texas Capital Bancshares suffers from weak gross profit margins, which could be a concern for investors looking for companies with strong profitability metrics. On a positive note, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
Investors interested in a deeper analysis of Texas Capital Bancshares may find value in the additional PRONEWS24 tips available on InvestingPro, which provide further insights into the company's financial health and future prospects. With the use of the coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking the full suite of insights and analytics that InvestingPro has to offer.
For more detailed analysis and additional InvestingPro Tips on Texas Capital Bancshares, visit: https://www.investing.com/pro/TCBI
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