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Ally Financial Inc (NYSE:ALLY) is scheduled to report fourth-quarter and full year 2017 results Jan. 30.
The Analyst
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Oppenheimer's Ben Chittenden initiated coverage of Ally Financial with an Outperform and $38 price target.
The Thesis
Ally Financial is continuing to diversify its business, which should improve returns, Chittenden said in a Monday note. (See the analyst's track record here.)
The auto lender still trades below tangible book value, and with the shift of the balance sheet to higher-yielding assets, Chittenden said he sees a chance for an increase in profitability over the next few years and for more upside. Insurance premiums have turned back up, and Chittenden said he expects to see a modest additional improvement.
It takes time for a bank to move above its tangible book value, but there is a benefit of getting paid to wait, said Chittenden. He estimates that Ally Financial has the potential to pay out more than $1 billion per year in 2018 and 2019, which implies approximately a 10-percent potential capital return in 2019.
The Price Action
Ally Financial closed up 1.84 percent at $30.38 Tuesday. It has gained more than 50 percent in a year.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.