JP Morgan says consumer finance stocks re-rated 'too quickly'

Navient

03/04/2024 11:25

** J.P.Morgan says consumer finance stocks have re-rated
"too quickly" widening gap between fundamentals and valuations
    ** Adds investors should take advantage of recent rally in
consumer finance stocks ahead of earnings
    ** S&P 500 consumer finance sub-index  .SPLRCPERS  is up ~16
so far this year
    ** Notes though earnings outlook for sector is set up for
"worse than expected" outcomes over next 12 months, investors
should take profit on strength and reduce risk 
    ** We believe that opportunistic "buy on weakness"
strategies should be limited to core, longer horizon investments
or to truly dislocated stocks until fundamentals and valuations
are better aligned - JPM
    ** JPM upgrades student loan management services provider
Navient  NAVI.O  to "neutral" from "underweight", noting stock
is trading at discount to book value and limited risk to core
federally funded student loans portfolio
    ** Brokerage downgrades Ally Financial  ALLY.N  and Guild
Holdings  GHLD.N  to "underweight" from "neutral"
    ** Says ALLY's upside is limited as investor focus shifts to
co's NIM target by mid-2025, while GHLD's valuation reflects
lower interest rates scenario 
    ** Downgrades Essent  ESNT.N  to "neutral" from "overweight"
on balanced risk/reward at current valuation
    

 (Reporting by Roshan Abraham)
 ((Roshan.Abraham@thomsonreuters.com))