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Ally Financial shares rated Buy by BTIG

EditorAhmed Abdulazez Abdulkadir
Published 2024-06-07, 10:00 a/m

On Friday, BTIG initiated coverage on Ally Financial (NYSE: NYSE:ALLY), assigning a Buy rating and setting a price target of $51.00. The firm's stance is influenced by the perception that the market has an overly negative sentiment towards Ally Financial, which is seen as a direct play on the broader auto industry's challenges.

The firm acknowledges the cautious outlook on the U.S. consumer and auto industry, citing concerns such as affordability issues, weakening used car prices, and declining sales activity. Despite these industry headwinds, BTIG notes Ally Financial's proactive measures, such as tightening underwriting standards back in 2021 and early 2022, which positions the company favorably against competitors who are retreating from auto lending.

According to BTIG, Ally Financial has managed to select better credit at a higher volume of originations, benefiting from its early response to the market's challenges. The firm expects that if Ally's net losses and net interest margin (NIM) follow the company's guidance, there could be a reassessment of the stock as the market gains confidence in Ally's 2025 earnings per share (EPS) estimates.

The firm's positive outlook on Ally Financial's shares is based on the belief that the company has effectively addressed the problems facing the auto lending sector. BTIG anticipates that Ally's strategic choices will lead to a stronger position within the market, which is currently shying away from auto lending due to macroeconomic weaknesses.

Ally Financial's current strategy and market position, as observed by BTIG, suggest that the financial institution is well-equipped to navigate through the industry's current downturn and emerge with a stronger credit portfolio. The firm's Buy rating and price target reflect a confidence in Ally's potential for growth and stability in the coming years.

In other recent news, Ally Financial Inc. has been under the spotlight due to its recent financial performance and strategic initiatives. The company reported a stronger-than-anticipated first-quarter revenue of $2 billion, leading to an upward revision of earnings estimates by BMO (TSX:BMO) Capital Markets and TD (TSX:TD) Cowen. Ally Financial's proactive management of deposit rates and liability sensitivity, coupled with strategic partnerships with automotive brands like Nissan (OTC:NSANY) and Toyota (NYSE:TM), have been noted as potential growth drivers.

In contrast, the company's expected decline in second-quarter deposits and increased criticized exposure highlight potential risks. Ally Financial also recently underwent a leadership transition, with Michael Rhodes assuming the role of CEO. This change is anticipated to bring fresh perspectives and strategies to the company.

Analysts from various firms have provided varied outlooks. BMO Capital Markets increased its price target to $37, maintaining a Market Perform rating. Barclays (LON:BARC) Capital Inc. set a price target of $43, maintaining an "Equal Weight" rating. In contrast, J.P. Morgan downgraded Ally Financial to "Underweight" from "Neutral," citing a valuation run-up that limits further upside potential.

These are all recent developments that investors should monitor closely.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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