On Monday, Piper Sandler increased its price target for Bridgewater Bancshares Inc . (NASDAQ:BWB) shares from $13.00 to $17.00, while maintaining an Overweight rating. The firm underlined the company's positive second-quarter performance and its potential for higher net interest income (NII) going forward.
The recent quarter's pre-provision net revenue (PPNR) met Piper Sandler's estimates, signaling a pivotal moment for the bank with an anticipated rise in NII. The firm's reiteration of the Overweight rating reflects confidence in Bridgewater Bancshares' capacity for further valuation expansion when compared to its peers. This optimism is based on the bank's robust organic balance sheet growth prospects in the Twin Cities area, a stable credit quality outlook, and an improving profitability profile.
Piper Sandler also noted Bridgewater Bancshares' historical success in generating superior tangible book value (TBV) growth and recent proactive excess capital management through share buybacks. The bank's strategic moves are seen as bolstering its financial position.
Despite the upward revision in the price target, Piper Sandler's earnings per share (EPS) estimates for Bridgewater Bancshares remain unchanged at $1.00 for 2024 and $1.25 for 2025. The new price target of $17.00 represents a significant increase and is based on a multiple of 13.5 times the firm's estimated 2025 EPS, which is a 3.0x increase over the higher peer multiples.
The valuation also accounts for Bridgewater Bancshares' scarcity value in the Twin Cities market and its superior credit profile. Piper Sandler's analysis suggests that the bank's improving profitability outlook justifies a premium valuation compared to its peers, who are currently valued at an average multiple of 11.0x.
In other recent news, Bridgewater Bancshares reported its 2024 second-quarter financial results, showing a stabilized net interest margin and a return to revenue growth. This marks the first time in nearly two years that the company has seen such growth. Despite a more subdued loan and deposit growth, Bridgewater Bancshares' asset quality remained strong with no net charge-offs and low non-performing assets. The company also noted its 30th consecutive quarter of tangible book value per share growth.
Furthermore, Bridgewater Bancshares was recognized as a top workplace for the fifth consecutive year. The company has also launched a new CRM platform, is developing a new online banking solution, and has made key hires in the treasury and banking areas. In terms of future expectations, Bridgewater Bancshares anticipates more robust payoff levels in the second half of the year and is focused on optimizing the balance sheet for longer-term growth.
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