Goldman Sees Limited Positive Catalysts For Navient, Downgrades to Neutral

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Navient Corp NAVI shares have gained 26 percent year-to-date. Goldman Sachs’ Eric Beardsley downgraded the rating on the company from Buy to Neutral, while maintaining the price target at $15. The analyst commented that the stock’s risk-reward currently appears more balanced.

Since adding Navient to the Americas Buy List on October 7, 2015, the stock had risen 25 percent, versus a 9 percent gain for the S&P 500 and 4 percent for the XLF. Analyst Eric Beardsley mentioned that the positive catalysts seemed to be limited, given:

  1. Recent securitizations had eased funding concerns
  2. Buybacks had been strong, at 18 percent of market cap in 2016
  3. Credit costs had been better than expected

Catalysts Could Recede

Navient was on track to repurchasing another 9 percent of its market cap through yearend. While stating that Navient was “an attractive value stock with self-help as a catalyst,” Beardsley pointed out that a large part of its revenues were backed by tailwinds from declining credit costs and low interest rates.

These positives were likely to slow in the coming years, exerting pressure on the company’s earnings, while buybacks would likely also moderate, the analyst noted.

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Posted In: Analyst ColorDowngradesAnalyst RatingsEric BeardsleyGoldman Sachs
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