JPMorgan raises Navient stock rating to Neutral, cuts price target

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JPMorgan raises Navient stock rating to Neutral, cuts price target

On Wednesday, JPMorgan made an adjustment to its stance on Navient (NASDAQ: NAVI ) Corporation ( NASDAQ :NAVI), shifting the rating from Underweight to Neutral. The financial services firm also revised its price target for the company's shares, reducing it to $17.00 from the previous $18.00.

The upgrade follows Navient's announcement of the outcomes from its strategic review. The company's focus is on cutting costs and maximizing near-term cash flows. However, Navient has not presented a long-term strategy to replace the declining revenue from its core Federal Family Education Loan Program (FFELP) portfolio.

Navient's stock performance has lagged behind JPMorgan's coverage universe, currently trading at a discount to book value (BV). This valuation is thought to reflect a more balanced risk/reward scenario. The limited risk associated with Navient's core FFELP portfolio and the expectation of credit performance plateauing are key considerations in the revised rating.

JPMorgan's more favorable perspective on Navient is influenced by the belief that the stock has been de-risked. This is partly because the consensus estimates have now aligned more closely with JPMorgan's own forecasts for the company. The firm's analyst cites these factors as the rationale behind the upgraded rating and adjusted price target.

InvestingPro Insights

In light of JPMorgan's recent adjustment of Navient Corporation's rating, a closer look at some key financial metrics may provide additional context for investors. According to real-time data from InvestingPro, Navient boasts a market capitalization of $1.88 billion and an attractive P/E ratio of 7.42, suggesting that the stock might be undervalued relative to its earnings. The company's price to book ratio stands at 0.68, reinforcing the notion of a discount to book value noted by JPMorgan.

InvestingPro Tips indicate that management's strategy of share buybacks could be a sign of confidence in the company's value, while the fact that Navient has maintained dividend payments for 14 consecutive years reflects a commitment to shareholder returns. Moreover, with liquid assets surpassing short-term obligations, the company appears to be in a solid financial position to navigate near-term headwinds.

However, it's important to note that analysts have revised their earnings expectations downwards for the upcoming period, and a sales decline is anticipated for the current year. These concerns are somewhat mitigated by the expectation that the company will remain profitable, as it has been over the last twelve months. For investors seeking a deeper dive into Navient's financials and future prospects, InvestingPro offers additional insights and tips. Use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the 6 other InvestingPro Tips for Navient at: https://www.investing.com/pro/NAVI.

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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