By Senad Karaahmetovic
Ally Financial Inc (NYSE:ALLY) shares closed almost 8% lower on Wednesday after the company reported worse-than-expected earnings. Moreover, the ALLY stock is down a further 3% on Thursday after the weak Q3 earnings print pushed analysts to cut their rating on shares.
Ally reported an adjusted EPS and revenue below the Street estimates. CEO Jeffrey Brown noted that “partially depressed” results are “a result of an impairment on a non-marketable equity investment related to our mortgage business, impacting $0.33 of EPS, and higher provisions as a result of loan growth in auto finance and a larger coverage build.”
Wells Fargo analysts cut the rating to Underweight from Equal Weight with a price target of $23 per share, down from $32.
“We believe NIM pressure and declining used car pricing will continue to weigh on fundamentals and sentiment,” they said in a client note.
“There's not enough clarity on the macro to make their planned December update a positive catalyst, in our view,” they added.
Similarly, Morgan Stanley analysts moved to Equal Weight from Overweight with a $28 per share price target, down from $40 per share, to reflect more clouded visibility. The lowered price target reflects slashed forward EPS estimates by 32%.
“The company has backed off its prior medium-term guidance and is looking for 4Q22 EPS that's ~40% below consensus. And if Fed continues down its aggressive hiking path by more than the forward curve reflects, there could be more pain to come in 2023,” the analysts wrote to clients.
Earlier this month, Raymond James downgraded ALLY shares to Market Perform.