* ThinkEquity notes that by any measure, they can conclude that First Marblehead's (NYSE:FMD) June quarter was a blow-out, surpassing their revenue estimate by nearly $9 million and EPS estimate by $0.11, net of an $0.18 tax benefit. Strong securitization volumes and yields, and a continuation in the positive scale leverage from greater utilization of existing infrastructure, were responsible for the superior quarterly results. Firm is raising their revenue and net income per share estimates and 12-month target price on FMD shares as a result of strong continuing momentum in a fast-growing market segment.
The company facilitated securitizations of $756 million of private student loans, which generated $115.4 million of service revenues, for a 15.3% yield. Last year, in the June quarter, FMD facilitated securitizations of $740 million of private student loans, generating $90.5 million of service revenues for a yield of 12.23%. Yields improved due to demand for ABS securities by the fast-growing student loan securitization market, as well as increases in open market interest rates.
As a result of this superior performance, the firm is raising their estimates of revenue and net income per share for FY07 to $695.4 million (up from a previously estimated $649.3 million) and $4.54, from $4.04, respectively. Firm is also raising their 12-month price target to $65.00 from $60.00, calculated as a valuation of 14.5x FY07 estimate of $4.54, in line with FMD's growth and P/Es in the private student loan industry. Reits Buy.
* FBR notes First Marblehead produced better than expected results on higher revenues, lower expenses, and a one-time tax benefit. Firm is encouraged by the still strong facilitation volumes and expense discipline shown in the seasonally slow quarter, but higher pre-payments caused residual write-downs for the second straight quarter - supporting their concerns regarding residual valuation. In any case, they believe the upcoming quarter will be a defining period for the company as it will face its first serious lending season with increased competition, and should give us more clarity into the trust as more loans season. With a lack of guidance from management at this time and concerns over trust performance, the firm is maintaining their Underperform rating. Firm is raising their price target $1 to $36 to reflect the benefit of the company's new tax strategy.
Notablecalls: FMD reported results last night and I thought to highlight the opinions of the most bullish firm (Think) and the most bearish firm (FBR). ThinkEquity's tgt of $65 is currently Street high with FBR's $36 Street low. I personally would not be surprised to see FMD surpass the $50 level today as short interest is still quite high. Suspect the shorts will step in around the $52-$54 level to chop the thing down.
The company facilitated securitizations of $756 million of private student loans, which generated $115.4 million of service revenues, for a 15.3% yield. Last year, in the June quarter, FMD facilitated securitizations of $740 million of private student loans, generating $90.5 million of service revenues for a yield of 12.23%. Yields improved due to demand for ABS securities by the fast-growing student loan securitization market, as well as increases in open market interest rates.
As a result of this superior performance, the firm is raising their estimates of revenue and net income per share for FY07 to $695.4 million (up from a previously estimated $649.3 million) and $4.54, from $4.04, respectively. Firm is also raising their 12-month price target to $65.00 from $60.00, calculated as a valuation of 14.5x FY07 estimate of $4.54, in line with FMD's growth and P/Es in the private student loan industry. Reits Buy.
* FBR notes First Marblehead produced better than expected results on higher revenues, lower expenses, and a one-time tax benefit. Firm is encouraged by the still strong facilitation volumes and expense discipline shown in the seasonally slow quarter, but higher pre-payments caused residual write-downs for the second straight quarter - supporting their concerns regarding residual valuation. In any case, they believe the upcoming quarter will be a defining period for the company as it will face its first serious lending season with increased competition, and should give us more clarity into the trust as more loans season. With a lack of guidance from management at this time and concerns over trust performance, the firm is maintaining their Underperform rating. Firm is raising their price target $1 to $36 to reflect the benefit of the company's new tax strategy.
Notablecalls: FMD reported results last night and I thought to highlight the opinions of the most bullish firm (Think) and the most bearish firm (FBR). ThinkEquity's tgt of $65 is currently Street high with FBR's $36 Street low. I personally would not be surprised to see FMD surpass the $50 level today as short interest is still quite high. Suspect the shorts will step in around the $52-$54 level to chop the thing down.
1 comment:
Shorts started chopping the thing down around 9:00 AM (pre mkt). Feeling somewhat stupid suggesting the stock could surpass $50.
I've been following this story for the past 12 months (started buying in the low 20ies). It used to move so very effortlessly but now there looks to be too much supply. While there is still a relatively large short interest I suspect FMD may have 5-10 pts downside in it in the near term. Just a feel, nothing more. I have no data (not known to the public) to back up my feel.
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