Key Takeaways:
Coastal Financial shares fell 49% in four weeks to $39.91, leaving the stock technically oversold as Wall Street analysts revise earnings estimates higher.
Keefe, Bruyette & Woods cut its price target on the bank to $53 from $95 while keeping an "outperform" rating, implying 32.8% upside from the current price, the firm said Friday.
The slide follows a bruising second quarter in which Coastal posted a $2.76 per-share loss, missing the $1.01 consensus by $3.77, on revenue of $60.37 million versus the $148.5 million estimate. The $42.1 million net loss stemmed from a $68.8 million credit expense tied to a single CCBX partner's roughly $500 million consumer-loan portfolio.
The stock now trades at 12.5 times earnings with a market value of $608.6 million, down from a 52-week high of $120.05. Four analysts rate the stock a buy and two a hold, with a consensus target of $114.20.
Underlying operating trends remained strong despite the charge. Coastal reported record net interest income of $89.4 million, a net interest margin of 7.27%, 9% quarterly loan growth and a 10.3% sequential rise in BaaS program fee income. The bank ended the quarter with a 10.86% CET1 ratio and about $1.01 billion in cash.
Management said the affected portfolio has been isolated, with no comparable issue found in the remaining $1.7 billion CCBX book, though resolution could take one to two quarters or as long as 12 to 18 months. CFO Brandon Soto is departing, with former CFO Joel Edwards returning as interim.
Stephens reiterated an "overweight" rating with a $110 price target, while TD Cowen cut its target to $120 from $145 with a "buy" rating. The consensus rating stands at "Moderate Buy."
The oversold reading and upward estimate revisions suggest the selling may be exhausted, but the CCBX resolution timeline remains the key swing factor. Investors will watch for updates on the partner portfolio and the expense review in coming quarters.
This article is for informational purposes only and does not constitute investment advice.
