On Tuesday, Stephens, a financial services firm, has increased the stock price target for FinWise Bancorp (NASDAQ:FINW) shares to $18 from the previous target of $17, while maintaining an Overweight rating on the stock.
The adjustment follows FinWise Bancorp's third-quarter earnings report, which showcased an operational earnings per share (EPS) of $0.27. This figure exceeded both the analyst's and the street's expectations, which were set at $0.22 and $0.21, respectively.
The third quarter for FinWise Bancorp was marked by a pre-provision net revenue (PPNR) of $6.9 million, surpassing estimates by 4.6%. A significant highlight from the quarter was the 24% increase in origination volumes, reaching $1.45 billion. This surge was attributed to a rise in existing client volume and the input from newly launched partnerships.
Despite expectations of a seasonal decrease in origination volumes in the fourth quarter, Stephens remains optimistic. The firm believes that the addition of new partners will likely bolster the origination outlook for the year 2025.
Furthermore, FinWise Bancorp's strategy of retaining an increased level of single-payment, fully-amortizing loans held for investment (SP HFI) and maintaining higher held-for-sale (HFS) average balances is seen as a positive move to stabilize the net interest margin (NIM).
Looking ahead, FinWise Bancorp's expansion into Bank Identification Number (BIN) sponsorship and payment services are key areas of focus as 2025 approaches. Stephens also anticipates that operating leverage will improve as the growth in expenses due to proactive reinvestment begins to moderate. The revised price target to $18 reflects these positive developments and expectations for FinWise Bancorp's performance.
In other recent news, FinWise Bancorp reported a significant increase in loan originations during its Q3 2024 earnings call, with the figure reaching $1.4 billion, a substantial jump from the previous five-quarter average of $1.1 billion. The company also announced the launch of three new lending programs. The net income for the quarter was reported at $3.5 million, or $0.25 per diluted share, and the tangible book value per share rose to $12.90.
Despite a projected seasonal decline in Q4, the company anticipates continued growth in originations, supported by these new programs and strategic partnerships. Moreover, non-performing loans increased to $30.6 million, with $17.8 million federally guaranteed. The company's net interest margin was 9.7%, with expected declines following Federal Reserve rate cuts.
These developments follow the company's plans to complete a payments hub by the end of 2023, with revenue generation expected to ramp up in 2025. Despite a modest increase in non-performing loans, FinWise Bancorp remains optimistic about future loan production and cross-selling opportunities with an expanded product offering.
InvestingPro Insights
Building on Stephens' optimistic outlook for FinWise Bancorp (NASDAQ:FINW), recent data from InvestingPro provides additional context to the company's performance and valuation. The stock's market capitalization stands at $214.02 million, with a P/E ratio of 15.18, suggesting a relatively modest valuation compared to some peers in the financial sector.
InvestingPro Tips highlight that FINW has shown a strong return over the last year, with a remarkable 90.59% price total return. This aligns with the company's reported operational successes and exceeding earnings expectations. The stock is also trading near its 52-week high, with the current price at 97.47% of its peak, indicating investor confidence in the company's recent performance and future prospects.
However, it's worth noting that InvestingPro Tips also point out that FINW suffers from weak gross profit margins, which investors should consider alongside the positive growth metrics. For those seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into FINW's financial health and market position.
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