Banking, finance, and taxes

Ally Faces Analyst Upgrade Brigade After Stronger Earnings

Jon C. Ogg

Published: October 19, 2020 10:43 am

When Ally Financial Inc. (NYSE: ALLY) reported earnings on Friday, the numbers handily beat expectations. They also were better than a year ago, which is something not many financial companies can claim on the heels of the COVID-19-induced recession.

Ally reported earnings of $1.25 per share and revenues of $1.68 billion, which were better than the $0.68 per share and $1.55 billion in revenue estimates. That represented earnings and revenue growth of more than 23%.

While the consensus earnings estimate from Refinitiv had been $1.46 EPS for 2020, that is against $3.72 EPS in 2019. The consensus for 2021 was $3.13 EPS.

Ally’s report and commentary indicate the company still sees the overall market conditions as challenging and volatile, despite it being well positioned for accelerating digital trends and evolving consumer demands in auto lending. Ally also noted that the third quarter had seen the highest metrics since it became a publicly traded company.

Ally Financial stock rose 2.7% to $28.63 a share on Friday’s post-earnings reaction, and it was up by an additional 3.8% at $29.70 after the opening bell on Monday.

More than 10 analysts have raised their price targets on Ally.

• Credit Suisse reiterated its Outperform rating and raised its price target to $33 from $29, talking up Ally’s earnings beat being driven by lower loss provisions, lower charge-offs, modestly higher net interest income, lease gains and other income items all more than making up for higher expenses.
• Janney reiterated its Buy rating and raised its target price to $34 from $28.
• Jefferies reiterated its Buy rating and raised its target price from $34 to $36.
• JPMorgan maintained its Overweight rating and raised its target price to $32 from $30.
• Keefe Bruyette & Woods reiterated it as Outperform and raised its target to $35 from $31.
• Morgan Stanley reiterated it as Overweight and raised its target price from $31 to $38.
• Piper Sandler reiterated its Overweight rating and raised its target price to $34 from $31.
• Stephens reiterated its Overweight rating and raised its target price to $40 from $35.
• Barclays hiked its price objective to $30 from $23.
• Citigroup’s target price rose to $33 from $27.
• Compass Point lifted its price target from $25 to $34.
• While CFRA still has a Sell rating, that was actually an upgrade from Strong Sell, and the firm raised its price target to $25 from $12 late on Friday. The firm even raised its 2020 EPS estimate by $1.05 to $1.85 EPS, noting very strong auto financing with the highest quarterly volume in five years.

Ally Financial stock has traded in a 52-week range of $10.22 to $33.34, and its Refinitiv consensus target price had been $29.69.