(MENAFN - ValueWalk)
igorgolovniov / depositphotos
First Republic Bank fell over 60%, but analysts still think it's buyable. New targets are more than 300% above the fresh lows. The bank appears insulated from SVB fallout but there is risk for the market. 5 stocks we like better than first republic bank
Shares of first republic bank (nyse:frc) are down 65% in a single day, extending its total decline to over 90% and counting. The reason is the growing risk in the financial system that is evidenced by the collapse of silvergate bank, silicon valley bank, and signature bank .
Get Our Activist Investing Case Study!
Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below!
q4 2022 hedge fund letters, conferences and more
Gates Capital Management Reduces Risk After Rare Down Year [Exclusive]
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for read more Find A Qualified Financial Advisor
Finding a qualified financial advisor doesn't have to be hard. smartasset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes .
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now .
The opportunity is that some intelligent people think the run on Silicon Valley Bank was overdone and the collapse was unnecessary.
This, along with the support of jpmorgan chase (nyse:jpm) and the Federal Reserve, has First Republic Bank set up for a rebound, but will it happen? The stock is trading at IPO levels, with prices not seen in over a decade, and the outlook is positive if not guaranteed, so there is a chance that it will.
First Republic's fall is all the more shocking, given the support of JPMorgan. JPMorgan and the FOMC have brought available capital up to over $70 billion, which should be ample to sustain the business.
Regarding the business, this company has some of the same exposures as Silicon Valley Bank but not to the same extent. Silicon Valley Bank's deposits were estimated at over 80% non-insured while a recent filing has First Republic's average consumer account under $200,000, the average business account under $500,000, and no sector representing more than 9% of the portfolio.
'First Republic's capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,' said Founder and Executive Chairman Jim Herbert and CEO and President Mike Roffler. 'As we have done since 1985, we operate with an emphasis on safety and stability at all times, while maintaining a well-diversified deposit base.'Analyst Sentiment Softens, First Republic Still A Buy
At least 3 analyst firms have come out with price target reductions or downgrades of this stock, but the takeaway remains bullish. Two downgrades are to Market-Perform from Strong Buy and Outperform at Raymond James and Wolfe Research while the price target reduction is from $168 to $130.
Compass Point downgraded the stock to Neutral, but this price target is 330% above the price. We can assume the consensus target will trend lower over the next few days or weeks, but if the new targets are consistent with this target, the stock will bottom and rebound.
Analyst David Long of Raymond James downgraded to Market Perform with no price target, thinking First Republic's issues are near-term. The risk of deposit outflows could cut into earnings, but there is an upside risk. The company's diversified model may provide the insulation it needs to outperform newly lowered expectations and spark a rebound in the share price.
This is assuming the institutions don't start shedding shares. The institutions own about 95% of the company and would be a formidable headwind to the market regardless of the company's underlying performance.
The Technical Outlook: 13 Years Wiped Out In A Week
The monthly chart of FRC is shocking because this stock has only trended upward since its IPO, and those 13 years of gains were wiped out in about a week. The stock may make a rapid recovery if the Fed can calm market nerves but even so, there will be resistance to higher prices that may be substantial. Until then, this sell-off appears to be overdone and ripe for a rebound. The questions are how high will it go, how quickly, and how long will it stay at that price?
should you invest $1,000 in first republic bank right now?
Before you consider First Republic Bank, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and First Republic Bank wasn't on the list.
While First Republic Bank currently has a 'Moderate Buy' rating among analysts, top-rated analysts believe these five stocks are better buys.
Article by Thomas Hughes, marketbeat