Goeasy Downgrade by BMO BMO downgrading the stock from Outperform to Market Perform and adjusting the price target to Cdn$202.00 from the previous Cdn$218.00. The firm cited concerns over the company's revenue yield and credit metrics in a challenging economic environment as reasons for the downgrade.
In a recent announcement, Goeasy reported preliminary financial results for the third quarter, adjusting its expected total revenue yield to 33.0-34.0%, a drop from both the earlier forecast of 34.0-35.0% and the previous quarter's yield of 34.9%.
BMO Capital Markets believes that this decrease may be attributed to a variety of factors including a rise in delinquencies, a shift in focus towards higher-quality unsecured loan originations, and an increased proportion of secured loans in the company's portfolio.
The analyst from BMO Capital expressed a recognition of Goeasy's strong execution and long-term growth potential. However, the current stock price, which is trading in line with its historical average, led the firm to adopt a neutral view on the stock's investment prospects, seeing a balanced risk-reward scenario.
The downgrade comes after Goeasy's management set new expectations for the company's third-quarter performance. The anticipated reduction in revenue yield suggests potential challenges ahead for the company, particularly in light of the softening macro-economic landscape.
Goeasy's adjustment of its third-quarter financial outlook and the subsequent downgrade by BMO Capital Markets reflects the broader economic pressures that companies are facing.
The detailed reasons provided by the analyst for the downgrade, including concerns about rising delinquencies and changes in loan origination and portfolio composition, offer insight into the specific challenges that Goeasy may need to navigate in the near term