BTIG analysts began covering specialty finance stocks on Friday, with five stocks receiving Buy ratings: Ally Financial (NYSE:) ($51 price target), Atlanticus Holdings (ATLC) ($45 price target), LendingClub (NYSE:) ) ($12 target), Synchrony Financial (NYSE:) ($60 target), Upbound Group (UPBD) ($45 target).
The firm said it is positive on the non-prime consumer lending space as it believes now is the time to invest in the area.
“Non-prime lenders were in an advantageous position as they tightened underwriting (thus improving margins) following the subprime recession that began in 3Q21,” the company said.
“We are now seeing origination volumes starting to accelerate, so these lenders/retailers are seeing a double benefit: higher risk-adjusted margins and increased revenue growth are accelerating their earnings,” they added. “We note that subprime lenders are taking share away from prime lenders as lending conditions tighten.”
Alternatively, the firm said it was being wary of large lenders and fintech companies. “Credit for major lenders began to deteriorate in late 2022 and early 2023, and we believe we have not yet peaked,” BTIG said.
“Many of our fintech companies face unique challenges, but two key themes are uneven profitability and access to finance, which remains unstable.”