On Wednesday, Piper Sandler adjusted its outlook on Nicolet Bankshares (NASDAQ:NCBS) (NYSE: NIC (NASDAQ:EGOV)), lowering the bank's price target to $82.50 from the previous $88.00. The firm kept its Neutral rating on the stock. This change reflects a revision in the bank's expected earnings and valuation in light of recent financial results.
The bank reported a mixed set of financial outcomes for the first quarter, with some areas of performance exceeding expectations while others fell short. Notably, the bank experienced a compression in its net interest margin (NIM), which was contrary to the anticipated stability. Additionally, the bank's average earning assets (AEA) base was smaller than expected, with a lower core deposit contribution.
Despite these challenges, Nicolet Bankshares demonstrated strong core fee income, well-managed operating expenses, net interest income (NII) that aligned with predictions, and continued favorable credit metrics.
Piper Sandler acknowledged the bank's long-term holding appeal, citing its above-average profitability, conservative credit strategy, and the ability to capture market share which supports organic growth. The bank's accumulating excess capital also provides flexibility for potential mergers and acquisitions.
However, the firm's stance remains neutral due to Nicolet Bankshares' current premium valuation. Piper Sandler suggests that a more favorable view could be adopted if the stock's valuation relative to its peers were to decrease.
The firm also revised its earnings per share (EPS) estimates for Nicolet Bankshares for the years 2024 and 2025. The new EPS forecasts are $6.85 and $6.60, respectively, down from the previous estimates of $6.95 and $7.05. The reduction primarily accounts for the smaller AEA base observed after the first quarter.
Despite the decrease in the price target, the valuation multiple applied to the 2025 earnings estimate remains unchanged at 12.5 times, aligning with the bank's long-term premium compared to its peers.
InvestingPro Insights
Recent data from InvestingPro reveals a nuanced picture of Nicolet Bankshares (NYSE: NIC) that investors may find valuable when considering Piper Sandler's revised outlook. The company's market capitalization stands at $1.15 billion, with a price-to-earnings (P/E) ratio of 20.1, slightly below the adjusted P/E ratio for the last twelve months as of Q4 2023, which is 18.72. This suggests a potential undervaluation relative to recent earnings. Additionally, the bank's revenue for the last twelve months was $272.5 million, though it experienced a slight revenue decline of 4.85% in the same period. Despite this, quarterly revenue growth was positive at 8.17% in Q4 2023.
InvestingPro Tips highlight that analysts anticipate Nicolet Bankshares will be profitable this year, which aligns with the bank being profitable over the last twelve months. Furthermore, the company has demonstrated a high return over the last decade, which may appeal to long-term investors. Notably, the bank's gross profit margins have been identified as a weak point, which could be a factor in the reduced price target from Piper Sandler.
For investors seeking a deeper dive into Nicolet Bankshares' performance and potential, additional InvestingPro Tips are available. With a promo code PRONEWS24, users can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to access these insights. Currently, there are 5 more InvestingPro Tips available for Nicolet Bankshares, which could provide further clarity on the bank's financial health and future prospects.
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