- CONN'S, Inc. (NASDAQ: CONN) shares have slipped 28 percent in the last six months, even after hitting a high of $43.49 on July 7.
- Stifel’s John A. Baugh upgraded the rating on the company from Hold to Buy, while maintaining a price target of $35.
- Continued share buybacks and lower provisioning for bad debts offer upside to the company’s shares, Baugh stated.
Conn’s stock has the potential to rise if the company continues to repurchase shares and makes a lower-than-estimated bad debt provision, analyst John Baugh mentioned. Conn’s is taking steps to improve its liquidity position by securitizing its receivables. The company also plans to take up further securitization in the future.
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The “dramatic change” in the capital structure of Conn’s has enabled it to repurchase a meaningful percentage of its stock at current prices, Baugh said. The company had announced plans to buy shares worth $100 million in the January quarter. Conn’s had already purchased stock worth $51.6 million and bonds worth $23 million in the October quarter.
Although Conn’s early state delinquencies are trending better, concerns persist over higher-than-normal late stage cure rates and potential deterioration in the collections of loans originated in oil impacted states. Baugh added, however, that improved underwriting standards make the company’s credit position better.
If the company is able to reduce its loss provision rate and sell the residuals, a dramatic upside can be expected in its stock, the Stifel report stated.
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