Seaport Global Securities Upgrades Navient Corporation (NAVI) to Buy

Seaport Global Securities analyst Bill Ryan upgraded Navient Corporation (NASDAQ: NAVI) from Neutral to Buy with a price target of $18.00.

The analyst comments "We are upgrading the shares of Navient Corp. from Neutral to Buy based on a sum-of-the-parts analysis, and establishing a price target of $18/share. First, we have previously estimated the value of the FFELP portfolio at $8.85/share. Second, the company ended Q3'24 with an adjusted cash position of $572MM, or $5.35/share (adjusted for a Q4 unsecured debt maturity and $65MM of share repurchases expected in Q4'24). Collectively, these two items are worth $14.20/share which approximates the current stock price. We have valued the consumer lending segment at 7x our 2025 estimate, or $12.50/share. On the other side, we estimate NAVI will exit 2025 with an annualized loss of ~$180MM in the “other” segment which is mostly corporate overhead and unallocated expenses. If we valued the other segment at 5x, Navient's value would be reduced by ($8.20)/share, suggesting a SOTP of $18.30/share. We see a favorable risk-reward setup since the collective cash and FFELP value approximates the current stock price. Given the recent change in administration, prepayment risk in the FFELP portfolio has diminished significantly, and the optionality now appears to be in the consumer lending segment. Navient is a very small participant in the in-school lending channel, but the recent change in administration gives us optimism that parts of the federal student loan program could be outsourced to the private sector to achieve savings in support of tax cuts. We also see additional value from disclosure of overcollateralization releases in the FFELP portfolio which are not included in our $8.85 value estimate. On the other hand, management has not articulated a clear strategic vision for investors, and our timing might be early as some benefits of the restructuring initiative may not be achieved until 2H'25 or early 2026. As such, we see some risk in the upcoming 2025 guidance relative to consensus, but believe the items potentially causing any shortfall will be transitory in nature. Erring on the side of caution, we have reduced our 2025 estimate from $1.35 to $1.25. At present, however, Navient is more of a SOTP v. earnings-based investment."

For an analyst ratings summary and ratings history on Navient Corporation click here. For more ratings news on Navient Corporation click here.

Shares of Navient Corporation closed at $13.92 yesterday.

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