HomeStreet Shares 'Now Fairly Valued,' DA Davidson Downgrades

HomeStreet Inc HMST shares have risen 44 percent since the last market correction in late June, as compared to the 18 percent rise in the NASDAQ Bank Index and 9 percent increase in the S&P 500. HomeStreet hit its 52-week high of $27.20 on Thursday.

D.A. Davidson’s Jeff Rulis downgraded the rating on the company from Buy to Neutral, while raising the price target from $27 to $29.

Stock Fairly Valued Now

“We believe the outperformance has been warranted given the stock's previous steep discount to peers and the bank's strong recent growth and financial progress,” Rulis mentioned, noting that the current valuation suggests HomeStreet is now trading more in line with its peers.

The analyst pointed out that the stock’s discount to peers had been cut in half to about 15 percent over the past couple of months and that the current discount appeared appropriate, given the “higher percentage of mortgage revenue and weaker relative performance metric.”

Story Unchanged

At the same time, Rulis also stated that “HomeStreet continues to be one of the strongest growth stories in our coverage universe, both organically and strategically.”

The company has witnessed robust commercial loan growth, and the analyst believes its greater share of commercial bank revenue is likely to be a key driver of multiple expansion.

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