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Ally Financial stock falls after double downgrade at BofA
© Reuters
By Senad Karaahmetovic
Bank of America analysts downgraded Ally Financial (NYSE:ALLY) by two notches to Underperform today, sending shares over 3% lower.
This is the second downgrade for Ally stock this week after Barclays cut the recommendation to Equal-weight from Overweight.
BofA also cut the price target as it went to $26 per share from the prior $35 as it expects business conditions to get worse before they get better.
“Rising interest rates are pushing funding costs higher while simultaneously causing loan demand to slow (according to FRBNY’s SCE). Moreover, we think investors will need to see evidence of credit quality performing better than expected before rewarding shares,” BofA wrote in a downgrade note.
The analysts added that competitive deposit rate offers could drag 2023 estimates below the $4 level.
“Although it is understood that ALLY will experience earnings pressures (from NIM headwinds and credit costs) earlier than bank stocks – where the debate as to when the sector will experience peak earnings is still brewing – we expect bank stocks to outperform pure-play lenders in the current economic backdrop, at least until investors feel confident downward EPS revisions have bottomed out,” they concluded.
ALLY stock closed at $25.24 yesterday.
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